Futures retraced Fridays rally, currently near 4315, which is off of 4250 lows. There were some fairly large shifts in our key levels as strips of in-the-money options (both calls & puts) were closed Friday. With that we look for fairly high volatility again today, but less than last week as put fuel has drained out. Resistance shows at 4355, 4380 & 4402. Support lies at 4307 the 4250.
We find it most interesting that the overnight futures move simply reversed most of Fridays move. On Friday our HIRO signal noted that the SPY/QQQ options flow shifted from long deltas (bullish) to short deltas (bearish) on the break from 4350-4400. Its also clear based on the shifts in today’s levels that with Fridays session there were some fairly material open interest changes. The primarily served to fill in interest >=4400.
Through our options lens we think the market has just simply reverted back to equilibrium after a strong short cover rally.
We now mark the 4400-4450 (Call Wall) area as major overhead resistance, likely for the next several sessions. As for the downside we’ve been watching our EquityHub model which shows major support at 4205 and 4100. A break of 4100 pushes us into that “Lower Bound” area, wherein we would expect another significant rally (purely based on options positioning). The “nodes” shown below indicate a significant change in the rate of dealer gamma hedging, which we believe functions as support.
Fridays expiration served to reduce the total amount of negative gamma across the S&P/QQQ. Therefore, while markets should remain volatile, they should have less movement compared to the extreme moves of last week.
We continue to believe that material, longer term rallies cannot form until there is clarity on monetary policy. Clarity around policy can reduce the size of put positions, which can reduce volatility and drive markets higher. Its likely this does not happen until March 16-18 (FOMC & OPEX).
|SpotGamma Proprietary Levels||Latest Data||Previous||SPY||NDX||QQQ|
|SpotGamma Imp. 1 Day Move:||1.17%,||Est 1 StdDev Open to Close Range (±pts): 50.0|
|SpotGamma Imp. 5 Day Move:||3.78%||4285 (Monday Ref Px)||Range: 4123.0 | 4447.0|
|SpotGamma Gamma Index™:||-0.58||-1.41||-0.22||0.01||-0.12|
|SpotGamma Absolute Gamma Strike:||4400||4300||440||14075||350|
|Additional Key Levels||Latest Data||Previous||SPY||NDX||QQQ|
|Zero Gamma Level:||4444||4408||0||0||0|
|Put Wall Support:||4200||4200||430||13000||325|
|Call Wall Strike:||4450||4600||444||14075||400|
|CP Gam Tilt:||0.86||0.87||0.69||1.03||0.55|
|Delta Neutral Px:||4460|
|25D Risk Reversal||-0.1||-0.11||-0.1||-0.09||-0.09|
|Key Support & Resistance Strikes:|
|SPX: [4500, 4450, 4400, 4300]|
|SPY: [450, 440, 435, 430]|
|QQQ: [360, 350, 345, 340]|
|NDX:[15000, 14500, 14075, 14000]|
|SPX Combo (strike, %ile): [(4402.0, 88.73), (4355.0, 92.57), (4307.0, 81.04)]|
|SPY Combo: [444.32, 429.43, 449.13, 450.44, 439.5]|
|NDX Combo: [13752.0, 13627.0]|