There was an issue with our email server today and apparently many messages werent delivered. As a result we are resending the AM note. Apologies for the problem | Markets are rallying to start the week and testing 2900. We see a big shift higher in the Zero Gamma level (~2900) and the SG Index stays in the “high volatility” zone. 2900 is first resistance as a lot of open interest sits at that strike. There is still very little “stability” in this market – meaning we can’t trust rallies or selloffs. We do not see anything in the data that gives us a directional bias to this volatility (remember: volatility simply means SPX movement up or down). We wrote a note here in regards to some data which points to record long call/short put positioning in the S&P500 by “small traders”. This data doesnt change our market outlook all that much in the near term in terms of targets (3000 top, 2800 support) however this could have an impact on volatility as it increases dealers negative gamma to the upside. This indicates that as the market goes higher dealers buy more futures, and this really kicks in if we approach the 3000 level. If you look at our model charts below you can see the change in shape of the gamma curve (blue shaded area) and how it changes at 3000/300(spy). This infers that >3000 we may build some “stability” into June expiration as all those calls start to increase in gamma and hedging starts to be tied to that level. Keep in mind this data is in regards to “small trader” and so we take this data into account while keeping with our standard models. |
Market Outlook: |
June Expiration range top: 3000, key support 2800. Break below 2800 invites a larger drawdown due to negative gamma. |
Event | Time EST | Actual | Forecast | Previous |
No events | – | – | – | – |
Signal Name | Latest Data | Previous |
SPX Ref: | 2888 | 2850 |
VIX Ref: | 30.53 | 31.69 |
SG Gamma Index: | -0.50 | -0.57 |
Gamma Notional: | $-84.71MM | $-289.44MM |
SGI Imp. 1SD Move: | 1.6% | |
Zero Gamma Level: | 2896.0 | 2857.0 |
Vol Trig: | 2860 | 2850 |
High Gamma Strike Resistance: | 3000 | 3150 |
Top Abs. Gamma Strike: | 2800 | 2800 |
Put Wall Support: | 2850 | 2750 |
Call Wall Strike: | 3000 | 3150 |
CP Gam Tilt: | 0.94 | 0.85 |
Delta Neutral Px: | 2831.0 | |
Net Delta: | $13,603.45MM | $15,063.50MM |
25D Risk Reversal | -0.13 | -0.13 |
Model Forecast: |
Top Absolute Gamma Strikes: [2800, 2900, 2850, 3000, 2600] The Volatility Trigger has moved UP: 2860 from: 2850 The PutWall has moved to: 2850 from: 2750 The Call Wall has moved to: 3000 from: 3150 The High Gamma Strike has moved to: 3000 from: 3150 SPX resistance is: 3000. Support is: 2800 .Reference ‘Intraday Support’ levels for support areas. The total gamma has moved DOWN: $-84.71MM from: $148.00MM Gamma is tilted towards Puts, may indicate puts are expensive Negative gamma is moderate favoring further swings in the market |