Futures have rallied back to 4400 overnight. Our gamma forecast is similar to yesterdays, however we anticipate a fairly quiet session ahead of the 2PM ET FOMC. We see resistance at 4400, followed by 4500. Support lines are 4350 & 4300.
The options market is currently pricing a one day move near 1.5%, which syncs with our gamma based S&P500 change of 1.47%.
Today is all about the Fed, and we look for a large directional move unfolding post-FOMC into the end of the week. The FOMC typically holds “even volatility premium”, and that appears to be heightened here with the VIX near 30. Along with that high implied volatility we hold a volatility inducing negative gamma position.
Neither of these elements (IV, negative gamma) are new, but today brings the trigger to unleash a fresh round of flows.
While we have no opinion to render on the FOMC event itself, we do see the options position at quite an extreme. Along the lines of our post yesterday on “The Lower Bound”, we present our “tilt” charts below. Its not often that we reference these charts, as we think they are mainly valuable during extreme drawdowns.
“Tilt” is simply taking call delta/gamma against put delta/gamma. This signals here may portray when the put position relative to calls is hitting an extreme. As you can see, both metrics have current readings near historical lower bounds.
The only two periods which are more extreme are December ’18 and March ’20. Both of those periods were quite tumultuous, but there tilt readings are also lower. We therefore think that Powell would have to almost deliberately deviate from expectations to initiate another downside leg from here.
Therefore, our data seems to suggest that a relief rally is imminent. A breakdown of implied volatility would be our “risk on” signal (ie VIX trending down below 28), as vanna flows kick in. If bullish flows ignite, we’d look for markets to test the 4550 (Zero Gamma) into Friday.
To the downside, we see 4200 in the SPX and 330 as levels wherein the hedging flows stall out.
| SpotGamma Proprietary Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 4360 | 4326 | 434 | 14225 | 345 |
| SpotGamma Imp. 1 Day Move: | 1.47%, | Est 1 StdDev Open to Close Range (±pts): 64.0 | |||
| SpotGamma Imp. 5 Day Move: | 3.7% | 4384 (Monday Ref Px) | Range: 4223.0 | 4547.0 | ||
| SpotGamma Gamma Index™: | -1.65 | -1.18 | -0.25 | -0.01 | -0.11 |
| Volatility Trigger™: | 4630 | 4590 | 456 | 14775 | 390 |
| SpotGamma Absolute Gamma Strike: | 4300 | 4600 | 440 | 14800 | 350 |
| Gamma Notional(MM): | $-746 | $-831 | $-1,072 | $-1 | $-580 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4559 | 4591 | 0 | 0 | 0 |
| Put Wall Support: | 4200 | 4200 | 425 | 13500 | 350 |
| Call Wall Strike: | 5000 | 4800 | 480 | 14800 | 400 |
| CP Gam Tilt: | 0.58 | 0.51 | 0.59 | 0.88 | 0.52 |
| Delta Neutral Px: | 4539 | ||||
| Net Delta(MM): | $1,548,590 | $1,468,156 | $180,616 | $36,080 | $101,021 |
| 25D Risk Reversal | -0.13 | -0.12 | -0.12 | -0.16 | -0.16 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4600, 4400, 4300, 4000] |
| SPY: [450, 440, 430, 420] |
| QQQ: [360, 355, 350, 340] |
| NDX:[15000, 14800, 14000, 13500] |
| SPX Combo (strike, %ile): [4364.0, 4255.0, 4303.0, 4342.0, 4355.0] |
| SPY Combo: [434.9, 424.04, 428.82, 432.73, 434.04] |
| NDX Combo: [14424.0, 14638.0, 14012.0, 13813.0, 14225.0] |
