Futures have pushed back to 4480 ahead of the Jackson Hole proceedings. Gamma did reduce some which gives us a higher SG implied move of 0.87%. With that we see major resistance at 4512 & 4498, with support at 4475 & 4450.
Powell speaks at 10AM which will likely set the tone for today. We think its most likely a non event which leads to a reduction in that “volatility event premium” and a push back to the large 4500/450 strike area. As it is an expiration with ~20% of S&P/QQQ gamma expiring, we see markets pulling to a large gamma zone of either 4500, 4450 or 4400 into the close.
Many of you have seen the following chart which shows the extensive time markets have gone without a 5% pullback. There are obviously many differences between today and 2017. However one major commonality is the desire to short volatility, which we see as a major driver of higher markets.
As we approach JHOLE today, and the major Sep FOMC/OPEX we think a window will be open for markets to break this downside streak. These events also present a volatility premium which will be attractive for traders to sell. We’ve touched on the risks of this vol selling dynamic several times (ex: here) and flag it as something to watch today.
The edge goes to vol sellers being correct and markets pushing higher – but one day they will over run and that will lead to a very nasty drawdown. On the off chance markets decline today and close under the Vol Trigger we suggest traders carry some defensive positions over the weekend.
4500 top, 4400 support into 9/17 OPEX.
|SpotGamma Proprietary Levels||Latest Data||Previous||SPY||NDX||QQQ|
|SpotGamma Imp. 1 Day Move:||0.87%,||48.0 pts||Range: 4432.0 | 4528.0|
|SpotGamma Imp. 5 Day Move:||3.0%||4452 (Monday Ref Px)||Range: 4319.0 | 4586.0|
|SpotGamma Gamma Index™:||0.84||1.92||0.05||0.04||-0.05|
|SpotGamma Absolute Gamma Strike:||4450||4500||448||14450||370|
|Additional Key Levels||Latest Data||Previous||SPY||NDX||QQQ|
|Zero Gamma Level:||4440||4430||0||0||0|
|Put Wall Support:||4350||4350||435||14000||365|
|Call Wall Strike:||4500||4500||450||15075||375|
|CP Gam Tilt:||1.17||1.13||1.03||1.51||0.85|
|Delta Neutral Px:||0|
|25D Risk Reversal||-0.08||-0.07||-0.09||-0.07||-0.09|
|Top Absolute Gamma Strikes:|
|SPX: [4500, 4400, 4200, 4000]|
|SPY: [450, 448, 445, 440]|
|QQQ: [375, 374, 370, 365]|
|NDX:[15075, 15000, 14450, 14000]|
|SPX Combo: [4516.0, 4498.0, 4512.0, 4525.0, 4539.0]|
|SPY Combo: [449.83, 448.05, 449.38, 450.72, 452.06]|
|NDX Combo: [15437.0, 15130.0, 15023.0, 15636.0, 15559.0]|