Informe SG Levels

Futures have pulled back a bit to 4650, just ahead of a large 9:30AM ET SPX options expiration. We registered over 35% of SPX gamma expiring on that AM expiration, with and equivalent amount of SPY, QQQ & IWM expiring at 4:15ET.  Additionally we note >50% of stocks have their most concentrated gamma positions expiring on the close.

With all of these large positions expiring, we are expecting high volatility in the negative-gamma-heavy QQQ/IWM, and many single stocks with similar positions (primarily tech & meme names).  We think that the S&P will maintain lower relative volatility, with major resistance at 4664 & 4696. Support is at 4625, then 4600.

Two days ago we laid out our two major scenarios for FOMC/OPEX. The first was the Fed upsetting markets, which would lead to a sharp drop into OPEX. The second was a Fed induced vanna rally, which we though would be large, but would hold into OPEX. If went into OPEX on a high, then we’d see a pull back next week. However if we ended the week at lows, that might fuel a post-expiration rally.

Essentially, our thinking was that next week would be “path dependent” on how this week ended.

As we all know, there was a violent post-FOMC rally in the 1.5 hours after Powell ended. Yesterday that move was completely unwound, with many names finishing at our under their pre-FOMC lows.

Model Overview:

4600 gamma flip level, 4550 critical support. 4700 overhead target.