Informe SG Levels

Futures are flat to last nights close at 4395. Today we anticipate a quiet morning session, with some movement in the afternoon due to the 2PM EST FOMC. The Call Wall pin holds at 4400, with large support at 4362. 4420 is major resistance above.

Our general view of FOMC days is that we head into the meeting with a lot of implied volatility “event premium” that is almost always deflated after the meeting.  The VIX is holding at 19, and the SPX options for today are pricing in a ~1.3% move.  You’ll note our gamma implied max move is 1.4% – so these are all roughly in line.

Between China and the FOMC its clear there is a volatility premium baked into markets and this should fuel a break away from 4400 over the next few days. What’s notable here is that even though the IV is high, our vanna models do not pick up and type of left skew in SPX. This implies that there are not many puts at or near current levels, and so that suggests any upside would be “drift” toward 4450. QQQ on the other hand is more neutral, and so this means less resistance on a move higher.

To the downside we still see this large inflection point at 4330, which is interestingly ~1.4% lower (todays SG implied move) from current SPX levels. Should Powell really upset traders, we think this is a solid downside target for today.

Model Overview:

4400 top of the range, 4330 critical support for August OPEX.