Informe SG Levels

4160 is the curernt futures price – flat to last nights close. There was little change in key levels overnight, with our models looking for a 90bps max move with 4200 resistance, 4150 support. We think a break of 4150 brings a quick test of 4100.

Our sentiment remains the same: that markets are poised for volatility but needs a catalyst to get the ball rolling.  While we give odds that this volatility expresses in a downward move, we recognize the fact that it can also manifest in a quick move higher.

There is much more pent-up energy in QQQ, which remains under “put” pressure. We see only about 15% of that position rolling of Friday, and that does not give tech much of a “charm” bid (i.e. put options decay leads to dealer short cover). Of particular interest in QQQ is the 330 strike, which stands out as a very large level.

Some are looking to tomorrows 8:30AM EST employment numbers as a catalyst. Tomorrows expiration is not particularly large for any of index/ETF’s and is unlikely to change the “gamma picture” much. It will likely be index/ETF price that first shifts to determine gamma’s influence. Higher prices resolve the volatility risk, lower prices invoke higher risk.

Model Overview:

4100-4250 is the range into May OPEX. Gamma is currently high which should lead to low volatility. As long as markets are >4170 we anticipate a low volatility market which grinds higher.