| Futures are flat to last nights close and we see little change in the SG Index & notional gamma levels. The Vol Trigger did jump to 3165(ES) which is important to note as it has been a support/resistance line for the last two days even though its moved ~40 handles. This movement is quite interesting and rare. Generally the level stays fairly stationary, but the fact is positioning in the SPX is quite “weak”. Usually during a bull run we see call positions build which supplies positive gamma and “stability” to the market. Not the case here. However, put volume isnt active either. So, we’re in a sort of catatonic state and/or focus is simply on a handful of hot stocks.
We saw a stat from @Callieabost on twitter that “AAPL/MSFT/AMZN” accounted for half of the 0.79% move in SPX yesterday. I bring all this up because options and volatility are linked to “correlation”. As everyone is aware by now we have a few stocks that are leading by a massive margin and a much more tepid increases in most other names – this is a type of low correlation. Typically when markets crash correlation moves higher, and that is a worry for me. If FANGS correct 10% (which is quite literally just a few days of gains) then what will the general SPX do? Particularly with put positions aka hedges currently light? (Recall that buying puts pushes dealers to short futures as a hedge). Clearly trying to call a top has been a fools errand, but at some point we will be given a warning shot. If these non-FANG names can’t rally now, then what happens to them when FANG’s turn south? At the moment we still have 3175 in SPX as a resistance band, if the market punches through that then 3200 is the target. To the downside we still think its a “buy the dip” market unless we break 3100. We do have a jobs number out shortly. |
| Market Outlook: |
| July positions remain very light with 3100 the largest strike. We mark 3000 to the downside and a weaker upside target at 3200. |
| Event | Time EST | Actual | Forecast | Previous |
| Unemployment Claims | 8:30am | 1375K | 1427K |
| Signal Name | Latest Data | Previous | SPY | NDX | QQQ |
| Ref Price: | 3160 | 3165 | 316 | 10701 | 257 |
| VIX Ref: | 28.34 | 28.08 | |||
| SG Gamma Index™: | 0.28 | 0.24 | -0.05 | 0.02 | -0.00 |
| Gamma Notional(MM): | $217.00 | $253.00 | $152.00 | $3.00 | $-119.00 |
| SGI Imp. 1SD Move: | 1.23% | 3121.0 | 3199.0 | |||
| Zero Gamma Level(ES Px): | 3105.0 | 3109.0 | — | ||
| Vol Trigger™(ES Px): | 3165 | 3125 | 316 | 9790 | 257 |
| High Gamma Strike Resistance: | 3200 | 3200 | 320 | 10100 | 270 |
| Top Abs. Gamma Strike: | 3100 | 3100 | 310 | 10100 | 250 |
| Put Wall Support: | 3160 | 2800 | 315 | 8500 | 250 |
| Call Wall Strike: | 3200 | 3200 | 320 | 10100 | 270 |
| CP Gam Tilt: | 1.19 | 1.22 | 1.06 | 1.6 | 0.86 |
| Delta Neutral Px: | 3036.0 | ||||
| Net Delta(MM): | $11,204.00 | $11,164.00 | $1,700.00 | $263.00 | $509.00 |
| 25D Risk Reversal | -0.1 | -0.1 | -0.1 | -0.09 | -0.08 |
| Model Forecast: |
| Top Absolute Gamma Strikes: SPX: [3200, 3150, 3100] SPY: [320, 315, 310] QQQ: [260, 257, 250] NDX:[10400, 10100, 10025] SPX Combo: [3194.0, 3169.0, 3166.0] The Volatility Trigger has moved UP: 3165 from: 3125 The PutWall has moved to: 3160 from: 2800 SPX is below the Volatility Trigger™. The 3105.0 level is first level of resistance and is critical as its the negative gamma threshold. The trigger level of: 3165 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: $217.06MM from: $252.00MM Gamma is tilted towards Puts, may indicate puts are expensive Positive gamma is moderate which should lead to smaller market moves. Average Range on day is 1.5% |