Futures are unchanged over the weekend, near 4130. 4100-4110 (SPY 410) remains the major resistance/pivot area. This is followed by 4135 & 4150 resistance (SPY412). A support band shows in the 4060 (SPY 405)/4055 (
)/4050 range. Combining the low
environment with high positive gamma positioning serves to drive mean reverting order flow, and low realized
We note both the SPY & SPX
‘s have shifted higher to 420/4200. This shift appears to be from the light addition of call positions at 420/4200, vs the reduction of calls (and/or addition of puts) at lower strikes. We generally consider higher
s a bullish development. That being said, the SPX has yes to test the 4150 SPX
which was in place for most of last week. Further, 4150 still stands as a prominent upside level, and we continue to see the best upside case here as “grinding higher” which implies that, in a best case scenario, it takes several sessions to test up into the 4200 are
As previously discussed, we have not seen calls meaningful build >420/4200 level over the past year as rallies seem to stall in the 4150-4200 vicinity.
On this theme of positions/demand historically drying up into 4200, we are seeing a sharp decline in options demand as the SPX tests 4100. Shown below is data from the OCC which depicts a decline in total options buying premium for puts & calls, across equities/ETF’s/Indicies (please go to the “Sentiment” tab to view the details of this chart). This is not simply a phenomenon of Friday being closed – this buying contraction started in late March. While traders do not seem to be interested in buying calls in this price area, they do not appear to be interested in downside protection, either. We’d also note that as
dries up, we are not seeing large options selling demand. Things appear to be at an impasse.