| There was a sharp move lower in futures overnight as we test the 2850 area. The SG Index reads negative with the market back into this “gamma neutral” zone of 2850-2900. The interesting thing to note about many of these larger moves recently has been that they happen with the cash market closed. It seems like futures traders whip things around overnight and then during the cash market we gravitate toward these large options strikes. To that point we see a lot of open interest at 2800 which may offer support, and 2900 is resistance. You will also see that most of the levels have clustered around 2900 making it key to which gamma regime we are in. Yesterday we wondered which large level would pull the market in (3000 or 2900), we can ask the same question of 2800 or 2900 today. A move to 2800 support could setup a larger negative gamma (and possible gamma trap) induced move into next week. On a larger rally we still see 3000 as the top heading into May as positive gamma comes in over 2900. |
| Market Outlook: |
| Into May we note 3000 as top of range, with 2900 being key to positive gamma. 2800 is the bottom of the range, with negative gamma and the possibility of a sharp “gamma trap” type move lower should that level break. |
| Event | Time EST | Actual | Forecast | Previous |
| ISM Manufacturing PMI | 10:00am | 36.7 | 49.1 |
| Signal Name | Latest Data | Previous |
| SPX Ref: | 2848 | 2882 |
| VIX Ref: | 38.07 | 34.15 |
| SG Gamma Index: | -0.25 | 0.40 |
| Gamma Per Point: | $-10.22MM | $99.6MM |
| SGI Imp. 1SD Move: | 0.01 | |
| Zero Gamma Level: | 2909.0 | 2911.0 |
| Vol Trig: | 2910 | 2855 |
| High Gamma Strike Resistance: | 2925 | 2950 |
| Top Abs. Gamma Strike: | 2900 | 3000 |
| Put Wall Support: | 2900 | 2500 |
| Call Wall Strike: | 2925 | 2950 |
| CP Gam Tilt: | 0.83 | 0.92 |
| Delta Neutral Px: | 2848.0 | |
| Net Delta: | $14,291.54MM | $14,719.14MM |
| 25D Risk Reversal | -0.13 | -0.12 |
| Model Forecast: |
| Top Absolute Gamma Strikes: [2800, 2900, 3000, 2850, 2700] The Volatility Trigger has moved UP: 2910 from: 2855 The PutWall has moved to: 2900 from: 2500 The Call Wall has moved to: 2925 from: 2950 The High Gamma Strike has moved to: 2925 from: 2950 SPX is below the volatility trigger. The 2877.0 level is first level of resistance and is critical as its the negative gamma threshold. The trigger level of: 2910 will act as overhead resistance. Watching VIX is key, if volatility comes in dealers will start to buy back shares as their short puts lose value. This could start a rally. The total gamma has moved DOWN: $2,737.60MM from: $2,873.00MM Gamma is tilted towards Puts, may indicate puts are expensive Positive gamma is high. Markets tend to have little movement (Average High/Low Range of SPX PX = 0.50%) and markets tend to be mean reverting. |