Informe SG Levels

Futures have pulled back to 4250 overnight. There is little change to our models from a volatility or key levels perspective. Resistance remains at 4300 then 4320 (SPY 430 equivalent). Support shows at 4146.

For the last two sessions our HIRO indicator has shown negative delta SPY/QQQ flow as the market rallied into 430/4300 (see chart below). This suggest the options market was not buying the rally into 4300, which syncs with the resistance line we’ve been highlighting at 4300.

We note single stock call action was fairly strong which showed some “risk on”, around the narrative of “bargain hunting”. We’d suggest that with implied volatility so elevated, it doesn’t take much to spark violent rallies.

As such, we continue to characterize rallies as “short covering” and subject to reversals until markets close up over 4300. A closing over 4300 could lead to a reduction in volatility due to a decline in negative gamma. Below 4300 we look for price action to remain fluid.

As we’ve been discussing at length, the window for a sustainable rally likely doesn’t open until next Wednesday’s FOMC & OPEX. However, its possible that some positive drift from vanna/charm start to tick up as we approach next week. The 3/18 puts are heavy, and without a material drawdown they will start to decay which could buoy price action. Therefore a strong case can be made for a drift above 4300, but 4400 remains major resistance into 4/16.