Good morning – we apologize for the delay in this AM’s note we had an issue with our raw data feed.
Futures are up this morning and back above key support at 4600. Gamma starts in a slightly negative position, and does not flip until 4640 which is considered first resistance. Our estimated max move today for the S&P is 0.78%.
Our view of the market is the same as over the past several sessions. We continue to see major support down near 4550 – in fact one of our largest combo strikes filled in at 4565 overnight. This implies the “base” in options positions is building. Should the market revisit that area we think the price action would stall – and that would lead to a drop in implied volatility. In turn this incentives traders to close put options, which leads to dealers buying back futures.
Further we note that implied volatility is down sharply this morning (black line today, blue y’day), as indicated in the graph below. This shows that the VIX complex (aka implied volatility) is decompressing, which is a tailwind for equities.
Looking forward, the first hurdle for the S&P to clear is that of the Volatility Trigger/gamma flip line of 4640 – above there markets could gain a bit of positive gamma support. Below that line elevated market volatility is likely to remain. More critically for bulls is for the market to enter the “orbit” of the large 4700 gamma strike, which would initiate more positive gamma pull. It could take some type of macro catalyst such as a reduction in fear around Covid, clarity on policy from Powell or a clear resolution on the debt ceiling that leads to a real release in this elevated implied volatility. Any drop in implied volatility should be seen as fuel for higher prices – this is the vanna component that is critical to rallies.
The most efficient way to view the composite picture is the gamma profile below. You can see the positive strike distribution that starts at ~4670 and builds up into 4717. From 4650 below there gamma remains quite neutral which is why markets are “fluid” in that price area.
Model Overview:
4640 gamma flip level, 4550 critical support. 4700 overhead target.
| SpotGamma Proprietary Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 4623 | 4626 | 457 | 16384 | 393 |
| SpotGamma Imp. 1 Day Move: | 0.78%, | Est 1 StdDev Open to Close Range (±pts):36.0 | |||
| SpotGamma Imp. 5 Day Move: | 4629 (Monday Ref Px) | ||||
| SpotGamma Gamma Index™: | -0.75 | -0.75 | -0.24 | 0.03 | -0.10 |
| Volatility Trigger™: | 4640 | 4640 | 461 | 15800 | 396 |
| SpotGamma Absolute Gamma Strike: | 4500 | 4500 | 450 | 16575 | 400 |
| Gamma Notional(MM): | $-217 | $-198 | $-578 | $5 | $-476 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4650 | 4640 | 0 | 0 | 0 |
| Put Wall Support: | 4400 | 4400 | 455 | 15000 | 390 |
| Call Wall Strike: | 4750 | 4750 | 470 | 16575 | 400 |
| CP Gam Tilt: | 0.84 | 0.9 | 0.84 | 1.58 | 0.7 |
| Delta Neutral Px: | 4463 | ||||
| Net Delta(MM): | $1,859,839 | $1,861,146 | $211,240 | $46,443 | $101,682 |
| 25D Risk Reversal | -0.09 | -0.09 | -0.09 | -0.06 | -0.07 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4700, 4600, 4500, 4400] |
| SPY: [470, 460, 455, 450] |
| QQQ: [400, 395, 390, 385] |
| NDX:[16575, 16500, 16000, 15000] |
| SPX Combo: [4754.0, 4565.0, 4602.0, 4514.0, 4615.0] |
| SPY Combo: [474.64, 455.72, 459.41, 450.65, 460.8] |
| NDX Combo: [16788.0, 16183.0, 15987.0, 16608.0, 16314.0] |
