It was a volatile overnight session, with ES futures putting in a low of 4138 before recovering to 4225. There weren’t any concrete headlines triggering near those ES lows – it just seems the market found a base and then ripped higher as EU markets (and SPX options) re-opened.
For today we have resistance at 4228 and 4300. Support is at 4149, and a break of 4149 invokes a move to 4050. We see little reason for volatility to subside unless 4300 is recaptured.
Our models have shown this idea of “controlled demolition” or “steps” lower in the S&P500, with the 4050 area an ultimate lower bound. Markets took another step down to 4140 overnight which we think brings 4050 into play. Note the S&P still has not traded below the 2/24 low of 4109 (Russian invasion).
Accordingly, as shown below, you can see that as far as positioning goes there are now 2 major strikes on the board: 4000 & 4300. Between these strikes we expect the market to remain very fluid.
Over 4300 positive gamma starts to marginally increase, which adds to resistance and a reduction in volatility. If the market moves below 4100 it invokes our “lower bound” concept, suggesting that the market is oversold from an options perspective.
We continue to see 4000 area as major support based on the large amount of open interest at that strike.
It’s likely there are still exogenous effects entering the market due to the huge moves in commodities & credit. Shown below is the MOVE index (aka bond VIX). When you consider that non-equity assets continue to push outside of their 2/24 extremes its hard to see equities as remaining contained inside of 2/24 lows (we opined on this yesterday).
The bottom line is that equity risk remains elevated at least until next weeks FOMC & OPEX (3/16 & 3/18). Extremely volatility (outsized moves up & down) likely remain in through next Wednesday, and we continue to see March OPEX as a significant options-based catalyst.
We think at a minimum the expiration of large put positions on 3/18 reduces negative gamma & therein volatility.
| SpotGamma Proprietary Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 4165 | 4188 | 418 | 13221 | 324 |
| SpotGamma Imp. 1 Day Move: | 1.53%, | Est 1 StdDev Open to Close Range (±pts): 64.0 | |||
| SpotGamma Imp. 5 Day Move: | 4.39% | 4267 (Monday Ref Px) | Range: 4080.0 | 4455.0 | ||
| SpotGamma Gamma Index™: | -1.67 | -0.89 | -0.37 | -0.02 | -0.18 |
| Volatility Trigger™: | 4395 | 4325 | 435 | 14050 | 355 |
| SpotGamma Absolute Gamma Strike: | 4000 | 4300 | 420 | 14075 | 330 |
| Gamma Notional(MM): | $-967 | $-926 | $-1,735 | $-3 | $-1,090 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4419 | 4443 | 0 | 0 | 0 |
| Put Wall Support: | 4100 | 4200 | 400 | 13000 | 315 |
| Call Wall Strike: | 4400 | 4400 | 438 | 14075 | 400 |
| CP Gam Tilt: | 0.57 | 0.51 | 0.42 | 0.69 | 0.33 |
| Delta Neutral Px: | 4435 | ||||
| Net Delta(MM): | $1,725,803 | $1,698,355 | $188,862 | $39,135 | $114,429 |
| 25D Risk Reversal | -0.14 | -0.13 | -0.13 | -0.13 | -0.13 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4400, 4350, 4300, 4000] |
| SPY: [430, 425, 420, 400] |
| QQQ: [330, 325, 320, 315] |
| NDX:[14075, 14000, 13500, 13000] |
| SPX Combo (strike, %ile): [4049.0, 4149.0, 4248.0, 4099.0, 4199.0] |
| SPY Combo: [409.36, 419.43, 429.5, 414.4, 424.46] |
| NDX Combo: [12987.0, 13185.0, 13396.0] |
