Informe SG Levels

Futures are off slightly to 4450. Many are on “tail risk” watch with the news out of Afghanistan, however there is little pre-open reaction. The VIX is currently 17, yet our gamma model is anticipating a rather tight trading range of 0.73%. Major resistance lines are at 4456 and 4479. Support is at 4450 and 4439. We give edge to markets holding in.

Gamma starts off at a rather high level, and as you can see below from our vanna chart, dealer resistance builds into 4500. 4500 is also our SPX Call Wall and the top of our range, but its important to note the SPY Call Wall is at 445. Therefore we think the 4465 SPX level is where the big resistance starts, and that seems to lower the odds of a 4500 test in the next few sessions. We think its unlikely 4500 is broken before 8/20 expiration.

The main issue here is that gamma deteriorates rather quickly to the downside. The official gamma flip line is at 4420, but we see 4439 support as critical. A break of 4439 likely invokes a quick test of 4400 due to dealer gamma selling. There is a decent amount of gamma positioned at 4400, and we think that is sticky for this session.

Recall we posted last week that we thought there was a window here for volatility to expand, primarily around OPEX and Fed hedging. The Afghanistan events certainly introduce uncertainty if nothing else, and maybe that is enough to allow volatility to make a real push. If “risk off” manifests we still mark 4430 as a major downside inflection point into 8/20 expiration.

Model Overview:

4500 top, 4400 support into 8/20 OPEX.