Futures have pulled back to 3780. There is a band of resistance above: at 3800 (Vol Trigger), 3820 (SPY380 equivalent, large gamma strike), and 3835 (SPX Call Wall) . Support shows at 3749 then 3700.
We find it no strange coincidence that the rally stalled right in this 3800 area, as its where put gamma and call gamma reach an equilibrium (Vol Trigger). This equilibrium is being tested ahead of highly anticipated Non Farm Payrolls tomorrow AM.
This 380 SPY level (3820SPX) is a key strike for markets, and our “bullish/bearish” pivot line. Above this strike our models look for volatility to decline as the size of call gamma increases vs puts. This potential reduction in volatility adds a bullish tailwind to equities. While below this level, our models hold a bearish stance.
We are seeing some call positions start to fill in at strikes above, particularly in short dated expirations as shown below. This offers some resistance to markets overhead, and is the first real bull test of the week (recall on Monday we said there was no resistance until 3800).
If the market does push through this 3835 area it signals more legitimate bull flow is at hand (not just put-fueled short covering), and suggests some longer term stability.
Because of Non Farms payrolls tomorrow and CPI next week, we are not assigning much meaning in moves today. Ultimately, as noted above, if the market closes up above the Vol Trigger (3800) we assign a bullish edge to markets and lower volatility. This offers more support to longs, and places some support underneath. Below the 3800 level, markets remain prone to nasty reversals.
Next Thursdays (10/13) CPI is the major trigger, as that data point now garners the same attention as FOMC events. We think this CPI print will fuel a directional move that sustains into 10/21 OPEX. This is akin to the period out of the Sep FOMC to Sep Quarterly OPEX (9/30).
| SpotGamma Proprietary SPX Levels | Latest Data | SPX Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 3783 | 3780 | 377 | 11573 | 281 |
| SG Implied 1-Day Move:: | 1.25%, | (±pts): 47.0 | VIX 1 Day Impl. Move:1.82% | ||
| SG Implied 5-Day Move: | 3.08% | 3589 (Monday Ref Price) | Range: 3479.0 | 3700.0 | ||
| SpotGamma Gamma Index™: | -0.79 | -0.75 | -0.26 | 0.01 | -0.08 |
| Volatility Trigger™: | 3800 | 3755 | 380 | 11525 | 285 |
| SpotGamma Absolute Gamma Strike: | 4000 | 4000 | 380 | 11750 | 280 |
| Gamma Notional(MM): | -540.0 | -552.0 | -1516.0 | 1.0 | -554.0 |
| Put Wall: | 3600 | 3600 | 360 | 11000 | 265 |
| Call Wall : | 3835 | 3835 | 385 | 11750 | 288 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 3921 | 3948 | 396.0 | 11387.0 | 315 |
| CP Gam Tilt: | 0.77 | 0.7 | 0.58 | 1.11 | 0.66 |
| Delta Neutral Px: | 3955 | ||||
| Net Delta(MM): | $1,631,892 | $1,619,214 | $202,009 | $46,305 | $100,966 |
| 25D Risk Reversal | -0.06 | -0.07 | -0.05 | -0.06 | -0.06 |
| Call Volume | 685,468 | 644,749 | 1,949,581 | 7,211 | 713,696 |
| Put Volume | 717,035 | 1,065,495 | 3,153,546 | 7,358 | 920,054 |
| Call Open Interest | 6,225,929 | 5,982,180 | 7,832,678 | 58,515 | 4,665,117 |
| Put Open Interest | 10,915,252 | 10,899,059 | 13,486,051 | 74,418 | 6,812,020 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4000, 3900, 3800, 3700] |
| SPY: [380, 375, 370, 360] |
| QQQ: [300, 290, 285, 280] |
| NDX:[13000, 12500, 12000, 11750] |
| SPX Combo (strike, %ile): [(3836.0, 78.69), (3749.0, 87.48), (3712.0, 73.37), (3700.0, 91.67)] |
| SPY Combo: [368.79, 373.7, 382.37, 369.93] |
| NDX Combo: [11747.0, 11284.0, 11492.0] |
