| Futures hit a low of 2825 overnight before rallying back towards 2875. 2840 seemed to offer support for most of the night which is interestingly the Delta Neutral price. Gamma shifts negative but levels do not change all that much. Zero Gamma and the Vol Trigger are both at 2900 which is also the largest gamma strike (and our resistance/pin level). The Put Wall moves to 2800 and is seen as support. We spent a fair amount of time looking for a reason for the afternoon drop but were unable to find a technical reason or a fitting narrative. In the end it appeared to be a large amount of “short term” ES volume, which got the ball rolling. We then had a fairly large MOC (market on close) amount of $1.3bn to sell which further pressured the markets along with a cross of Zero Gamma. This combines into a nice momentum trade lower. Yesterday we came across this chart highlighting rather poor liquidity in futures which makes it susceptible to just this type of move from a big player(s) and supports the idea of mean reversion once they lay off. This is opposed to “real money” and fundamental selling. We still mark Friday as a possible turning point or pivot in markets, and think 2900 will remain in play until then. Lastly note the Fed speaks at 9AM EST. |
| Market Outlook: |
| Into Fridays May Monthly OPEX, we note 3000 as top of range, with 2900 being key to positive gamma. 2800 is the bottom of the range, with 2850 support. Depending on where the SPX closes Friday we could see state change in markets next week. |
| Event | Time EST | Actual | Forecast | Previous |
| Core PPI m/m | 8:30am | -0.1% | 0.2% | |
| PPI m/m | -0.5% | -0.2% | ||
| Fed Chair Powell Speaks | 9:00am |
| Signal Name | Latest Data | Previous |
| SPX Ref: | 2871 | 2860 |
| VIX Ref: | 30.93 | 31.48 |
| SG Gamma Index: | -0.36 | 0.19 |
| Gamma Notional: | $-291.91MM | $-390.76MM |
| SGI Imp. 1SD Move: | 1.5% | |
| Zero Gamma Level: | 2907.0 | 2896.0 |
| Vol Trig: | 2895 | 2930 |
| High Gamma Strike Resistance: | 3000 | 2940 |
| Top Abs. Gamma Strike: | 2900 | 2900 |
| Put Wall Support: | 2800 | 2700 |
| Call Wall Strike: | 3000 | 2940 |
| CP Gam Tilt: | 0.84 | 0.83 |
| Delta Neutral Px: | 2842.0 | |
| Net Delta: | $14,761.71MM | $14,384.11MM |
| 25D Risk Reversal | -0.12 | -0.1 |
| Model Forecast: |
| Top Absolute Gamma Strikes: [2900, 2800, 2850, 3000, 2950] The Volatility Trigger has moved DOWN: 2895 from: 2930 The PutWall has moved to: 2800 from: 2700 The Call Wall has moved to: 3000 from: 2940 The High Gamma Strike has moved to: 3000 from: 2940 SPX is below the volatility trigger. The 2907.0 level is first level of resistance and is critical as its the negative gamma threshold. The trigger level of: 2895 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 has moved UP: $-292.00MM from: $-391.00MM Gamma is tilted towards Puts, may indicate puts are expensive Negative gamma is moderate favoring further swings in the market |