Informe SG Levels

Futures have pulled back slightly to 4565. We look for muted volatility today, with an S.G. implied move of 0.65%. Resistance is at 4600, with support at 4550 & 4500. Risk appears to remain “on” based on moves in single stocks & volatility yesterday. Bulls retain the edge as long as the S&P remains above 4500.

Yesterday we were looking for the S&P to push to one side of the the 4500-4600 void. It took a decent shot up to close at 4582, +0.80%. QQQ however had plenty of energy, closing +2%, with many tech/meme names launching higher. We covered TWTR extensively, but the moves were also apparent in many FAANG+T (all up 2-4%) and meme’s (ex: PTON, DKNG, ZM, SHOP, etc all >4%).

The VIX (~19) continues to grind down, making lows (18.5) not seen since mid-January. We’ve discussed how very short dated options have hit levels we consider a lower bound, and this decline in VIX suggests volatility expectations farther out in time are starting to drag lower. This despite last weeks brief spasm(s) related to JPM’s collar trade (as marked below). Its seems as if the vol premium in “this weeks” options have been full extracted, so traders are reaching out a bit in time.

Continuing on the “vol-squash” theme, we’ve posted our risk reversal monitor below. This shows us the price of put options relative to calls, on a rolling 30 days-to-expiration basis. As you can see the current level is up near a higher bound that goes back to early ’20. In other words: put demand is low.

For now these signals are all sending “all clear” messages, with data trending away from demand for protection. What is interesting here is that while put demand seems de minimis, there isn’t exactly a big bid for calls. For example, yesterday the SPX added only ~1000 calls to the 4600 line.