Futures have pushed higher to 4725. This leads to a strong build in gamma, and what we see as a very tight trading range for today (est: 0.44% max SPX move open/close).  The 4750 Call Wall is major resistance, with support at 4715 and 4700.

The relief rally obviously came in spades yesterday/overnight as the S&P pushes into “peak gamma”. As you can see in the figure below, a large drop in gamma occurs tomorrow (Friday,12/17) wherein we estimate >40% of total SPX/SPY gamma expires. We’re therefore not looking for much more movement out of the S&P today into tomorrow, and see volatility expanding next week. We also note 400 as our pin point for QQQ (at that level premarket), with IWM having some room to run into 225 resistance.

As always we navigate new highs using our Call Wall metric, which is at 4750. Any push through that level and we’d consider the market overextended. It does appear the Call Wall is close to rolling up to 4800, which is signaling that call options are being positioned at higher strikes. We view this as a catalyst for higher SPX prices. One could certainly view the large gamma expiration as clearing the resistance above, allowing for upside volatility.

Those looking for action today are likely better playing single stocks, particularly those with active short term options activity (AAPL, NVDA, AMC, TSLA, etc). Many of these names were “put heavy” heading into yesterday and are likely to draw out the “day trading” crowd which prefer the high leverage of options which expire tomorrow (calls in this case).

One last note about implied volatility. There was a VIX low around November 5th, and using that as a barometer you can see below that the current VIX structure remains elevated above those Nov “blue sky” levels (pre Omnicron, pre Taper concerns). There is a fairly large expiration on 12/31, and we’d anecdotally note that implied vol often holds a bid into that expiration. The point here is that there is arguably a bit more “vanna fuel” left in the tank, but its going to take “real buyers” (i.e. not volatility short covering) to continue the Santa Rally.

Model Overview:

4600 gamma flip level, 4550 critical support. 4750 overhead target.