Informe SG Levels

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.

Model Overview:

4500 top, 4400 support into 9/17 OPEX.