Informe SG Levels

Futures are again holding just below that large 4200 line, which remains the key options level. Other levels are little changed with the Volatility Trigger at 4195 and major resistance at 4222 (Combo Strike).

While the SPX holds a fairly material set of positions from 4100-4200, the SPY does not. The total S&P 500 gamma profile is shown below. You can see that when we look at gamma from an SPX+SPY perspective there are no large positive gamma bars (ie bars to the right) anywhere below 4195.  Said another way: SPX seems stable but SPY does not. Additionally QQQ holds a flat to negative gamma position, which implies little support below.

The bottom line is that we have a neutral view of markets below 4195, and high risk appears below 4160. We’re primarily concerned about an exogenous shot to markets here due to all this meme stock mania.  These stocks are crashing higher and that liquidity vacuum can infect larger markets via margin calls and credit issues (like Robinhood).

Here is our chart from Jan 25th when Melvin Capital blew up. Note the correlation between the spike in GME and the drop in the SPX.

Model Overview:

While markets hold 4200 we look for a low volatility grind higher, with 4250 the overhead target. 4160 is the gamma flip line, and therefore critical support.