Informe SG Levels

Futures are trading at 4454, down from overnight highs of 4483. Our models continue to estimate high volatility, with resistance at 4470, then 4500. Support is at 4450 and 4400.

We’ve see a shift higher in the gamma tied to 4500, and view that as resistance into Fridays OPEX. Additionally it seems that despite what seemed like a bullish trading setup, markets were unable to gain any traction once the cash session opened. Implied volatility [IV] remained flat throughout yesterdays session, as did our HIRO intraday delta readings. This is neutral trading in what we’d deem a neutral zone, and anecdotally is a signal in and of itself (bulls unable to move the needle).

Further we note that 4500 is our Call Wall, which means our models read that line as the strike with the most net positive gamma. This seems to be more due to the attrition of call gamma at higher strikes, which suggests a material lack of demand for upside calls.

With the addition of calls to 4500, our gamma flip point (Vol Trigger) now rests at 4470 which implies that dealers do not have much hedging to do from a gamma perspective. Coupled with the 4500 gamma buildup, we see the 450SPY/4500SPX area as a fairly solid resistance point for today. If IV comes for sale, that will be a mechanism to push markets higher, but without large deltas coming from put sales and/or call purchases we think upside remains fairly limited.

There were about 20k total contracts (10k each puts/calls) added to the 4450 strike, which suggests the 4400-4500 range is less “fluid” than noted yesterday. 4400 should remain as solid short term support.