Informe SG Levels

Futures are down some to 4565. Key resistance is at 4584 and 4600, with support at 4570 and 4550.  We look for another fairly tight trading range, with a max SG implied move of 0.73%.

We note that the VIX has a bid this morning, up near 17.50. With the FOMC on 11/3 we suspect that implied volatility will keep a small bid which we think translates to a few more days (Mon, Tues) of markets holding this general price area. The size of gamma expiring today has reduced some, too, such that SPY/QQQ have <=25% of gamma expiring. This implies todays key ranges for hold Monday.

As we look past the FOMC we’d give edge to a final year end volatility “release” which could play into a rally for year end. There are many put options in Dec 17 & Dec 31st expiration, and the decay should pick up, adding fuel to a push higher in markets. In the chart below you can see that realized volatility is still modestly above recent lows, and this weeks tight price action should start to pressure that lower. This may also help to press implied volatility (ie VIX) lower (post-FOMC).

Finally many of you will see that the SPX Call Wall did shift higher to 4650. This was a bit unexpected, but it appears this was the result of puts being added to 4600 (vs Calls being added to 4650). Therefore we do not read much into this current shift (note SPY’s Call Wall holds 460), but there does seem to be a consistent build at call strikes overhead, which we view as bullish.

Model Overview:

As long as the S&P500 holds 4500 we expect positive gamma flows and lower implied volatility to boost markets.