| Futures do not give us much direction here as they are flat to last nights close. Levels have consolidated at 3050 and notional gamma gets a slight boost from the call buying yesterday. We seem to have reestablished the 3100 base at 3050 which gives us a similar setup to yesterday wherein below 3050 opens the door to another rapid move lower with 3017 (combo strike) being first support. This “base” moving is something I can’t really recall seeing and is likely a function of the low PC ratio. If you look at the Gamma Tilt indicator its higher than yesterday, which supports this notion that the selloff did not bring out more hedgers – mainly (as we see it) dip buyers. We would generally expect larger put:call volumes on a market drop as traders either add downside hedges, or close them. Notice that our Put Wall didnt budge which supports this lack of put volume, and is something I’d expect to see as hedges are added or rolled lower. My point is it appears the options market treated yesterdays decline as “no big deal” and we remain underhedged and exposed to larger moves lower.
Once again we are monitoring VIX for cues on direction here (higher VIX->lower SPX). There is also a lot of data out this AM which may help set the tone. Overhead targets on a rally are 3078(ES) and then 3100. |
| Market Outlook: |
| July has 3000 support and 3200 the top of the range. Positions are still light, and we wait for a range to develop. |
| Event | Time EST | Actual | Forecast | Previous |
| Core Durable Goods Orders m/m | 8:30am | 2.1% | -7.7% | |
| Durable Goods Orders m/m | 10.3% | -17.7% | ||
| Final GDP q/q | -5.0% | -5.0% | ||
| Unemployment Claims | 1320K | 1508K | ||
| Bank Stress Test Results | 4:30pm |
| Signal Name | Latest Data | Previous |
| SPX Ref: | 3039 | 3046 |
| VIX Ref: | 34.56 | 33.84 |
| SG Gamma Index: | -0.23 | 0.16 |
| Gamma Notional: | $-255.00MM | $-336.00MM |
| SGI Imp. 1SD Move: | 1.0% | 3009.0 | 3069.0 |
| Zero Gamma Level(ES Px): | 3078.0 | 3085.0 |
| Vol Trig(ES Px): | 3050 | 3105 |
| High Gamma Strike Resistance: | 3300 | 3200 |
| Top Abs. Gamma Strike: | 3050 | 3100 |
| Put Wall Support: | 3050 | 3050 |
| Call Wall Strike: | 3300 | 3200 |
| CP Gam Tilt: | 0.8 | 0.75 |
| Delta Neutral Px: | 3009.0 | |
| Net Delta: | $10,835.00MM | $10,672.00MM |
| 25D Risk Reversal | -0.12 | -0.11 |
| Model Forecast: |
| Top Absolute Gamma Strikes: [3300, 3200, 3150, 3100, 3075, 3050, 3000, 2950, 2900, 2800] The Volatility Trigger has moved DOWN: 3050 from: 3105 The Call Wall has moved to: 3300 from: 3200 The High Gamma Strike has moved to: 3300 from: 3200 SPX is below the volatility trigger. The 3078.0 level is first level of resistance and is critical as its the negative gamma threshold. The trigger level of: 3050 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: $-256.00MM from: $-336.00MM Gamma is tilted towards Puts, may indicate puts are expensive Negative gamma is moderate favoring further swings in the market |