Informe SG Levels

Futures have pushed a bit higher to 4450. There is a lower amount of gamma in markets, which pushes our 1 day implied move to 1.1%.  We see resistance at 4486 & 4509 with support at 4425 & 4400. Bulls maintain control as long as markets hold 4400.

If we do see a rally, our models do not anticipate a break of the 4500/450 Call Wall before Friday. As you can see in the chart of SPY below, there is a real lack of size built up over 450 which is why we see that line capping markets. A push higher in markets to that 4500 area would likely invoke enough gamma to lock down volatility and drift into Friday.

Any move lower would tick volatility higher as gamma deteriorates rapidly under 4425. A move lower, particularly early in the week leaves the door open for a decent drawdown. We think volatility sellers would be a bit more cautious this week, likely due to Jackson Hole which starts Thursday. As a result of these meetings we still expect implied volatility to hold some premium into this weekend, and keep volatility a bit higher this week.

Looking forward we would anticipate this volatility bid dropping next week which may help markets stage a bit higher. Markets then shift to a highly anticipated Sep FOMC meeting which lines up with a large quarterly OPEX.

Model Overview:

4500 top, 4400 support into 8/20 OPEX.