Futures touched overnight lows of 4270 before bouncing to current highs of 4308. We look for another day of high volatility, with resistance initially at 4325, then 4365. Support is at 4300, then 4275.
The EquityHub model has been quite effective at mapping out the major zones, and as you can see todays model still holds that lower bound of 4275, with an upper bound of 4380. This generally syncs with where the Vol Trigger (4265) sits, too. The market would need a positive catalyst (more than just implied volatility rolloff (ie vanna flows)) to push through that area.
As per yesterdays note this market is quite wound up, and with the S&P unable to break that lower bond of 4275 (after several attempts) it may be that the path of least resistance is higher. That being said we don’t think the bullish case is “locked in” for the longer term until and unless we break 4400.
The term structure of implied volatility remains interesting. Note in the image below how very short term SPX implied volatility[IV] remains bid while anything thats out just a few weeks isn’t catching up. In other words: short term uncertainty doesn’t seem to reverberate out in time.
For months we’ve had a very steep contango to the IV term structure wherein it seemed like very short dated traders were selling vol with both hands. Whatever that short term supply of volatility was it has gone, and we think this results in the jumpy action thats been in markets as of late.
It could well be that a resolution of the debt ceiling or some other macro factor is needed to flipp this short vol supply back on – but we think contango is needed to resume higher SPX prices.
Model Overview:
Large negative gamma position forecasts large, volatility swings. This should continue until/unless the S&P recovers 4400.
| SpotGamma Proprietary Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 4288 | 4298 | 428 | 14480 | 352 |
| SpotGamma Imp. 1 Day Move: | 1.97%, | 84.0 pts | Range: 4204.0 | 4372.0 | ||
| SpotGamma Imp. 5 Day Move: | 6.11% | 4326 (Monday Ref Px) | Range: 4062.0 | 4590.0 | ||
| SpotGamma Gamma Index™: | -1.32 | -0.69 | -0.32 | -0.04 | -0.17 |
| Volatility Trigger™: | 4365 | 4380 | 435 | 15060 | 369 |
| SpotGamma Absolute Gamma Strike: | 4200 | 4450 | 430 | 15500 | 350 |
| Gamma Notional(MM): | $-718 | $-809 | $-1,334 | $-4 | $-920 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4418 | 4396 | 0 | 0 | 0 |
| Put Wall Support: | 4200 | 4200 | 420 | 14000 | 350 |
| Call Wall Strike: | 4500 | 4500 | 450 | 15375 | 375 |
| CP Gam Tilt: | 0.67 | 0.58 | 0.63 | 0.69 | 0.48 |
| Delta Neutral Px: | 4299 | ||||
| Net Delta(MM): | $1,454,310 | $1,395,239 | $178,340 | $43,792 | $93,651 |
| 25D Risk Reversal | -0.09 | -0.09 | -0.09 | -0.08 | -0.08 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4450, 4300, 4200, 4000] |
| SPY: [440, 435, 430, 420] |
| QQQ: [360, 355, 350, 340] |
| NDX:[15500, 15375, 15000, 14000] |
| SPX Combo: [4194.0, 4241.0, 4292.0, 4215.0, 4168.0] |
| SPY Combo: [418.78, 423.5, 428.64, 420.92, 416.21] |
| NDX Combo: [14376.0, 14173.0, 14593.0, 14796.0, 14709.0] |
