Informe SG Levels

Futures have rallied back into the 4270 area. We look for volatility to remain elevated, with resistance at 4300 & 4320 (SPY 430). Support shows at 4249 and 4199.

With little change in options positioning our outlook remains like that of the last several days. If the S&P can breach 4300, we look for volatility to decline, and a pinning of the 4300-4400 range into 3/16 (FOMC). If markets remain under 4300, the change of an outsized move down into 4100 remains elevated.

Sharp rallies should continue to be classified as “short covering”, and therefore fragile and subject to fast reversals. In our view true, meaningful risk on only comes through clarity on monetary policy and, to a lesser extent, geopolitics. The geopolitical situation certainly presents tail risks, but we large positions expiring next Friday which are “Fed hedges”.

At this moment >=30% of total S&P delta expiring on 3/18 which we think think brings dealer short-hedge covering. Below you can see the put delta:call delta ratio below (green line), and that our current reading rivals that of Dec ’18 and Mar ’20. These expirations can be correlated to sharp rallies in the S&P(red line).

Following OPEX, we think 4500 is a key overhead target into end of month (quarterly OPEX).