Informe SG Levels

The overnight session opened higher at 4234, but those gains have consolidated back to 4220.  For today we note a large Combo strike at 4242 which we mark as resistance, with 4200 support. Our volatility estimate (SG implied max move) is 0.95%. The Volatility Trigger major support line has backed down to 4175 (from 4195) which is our critical risk line. This suggests there are now more hedges in the 4200 area which is supportive of markets.

Our data reviews from the weekend picked up an interesting shift in the vanna model from last week. For most of last week we held an SG Implied move of <1%, the exception being Friday (1.19%). As we noted Friday night, this higher volatility manifested in an upside breakout to 4220.

While that gamma component (SG implied move) picked up higher volatility Friday, the vanna model indicated less upside resistance. See the last three days of our vanna model below. When the data is skewed to the right it indicates larger overhead resistance. As you can see on Thursday (far left) there was a “resistance skew”, and that shifted neutral on Friday. Accordingly for today that resistance skew is back (model FAQ here).

This sudden but subtle shift between the gamma model seeing higher volatility, and the more neutral stance of the vanna model is particularly interesting given that the S&P had really been struggling to breach and hold 4200 before Friday.

This plays in with our overall picture that when the SPX is >4200 we should have low volatility and a market that grinds higher. Into 6/18 OPEX, we are watching key support at 4200, and 4250 our Call Wall overhead target. Call gamma is building up at 4275, and if that becomes the Call Wall then our top end range would expand accordingly.

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.