Macro Theme:
Short Term SPX Resistance: 4,450 Call Wall
Short Term SPX Support: 4,400
SPX Risk Pivot Level: 4,300
Major SPX Range High/Resistance: 4,450
Major SPX Range Low/Support: 4,000
‣ Barring a major CPI miss, one has to favor a final Christmas rally out of late Nov and into the December Expiration. Assuming that the CPI is in line, we’d anticipate the equity market high being Wednesday AM 11/15, with consolidation happening into & around 11/17th (Equity OPEX). This would clear the way for a final, year end rally. 4,500 is our current upside target in that scenario, and that would adjust based on call positioning.
*updated 11/9
Founder’s Note:
ES Futures are flat at 4,427. Key SG levels for the SPX are:
- Support: 4,400, 4,370
- Resistance: 4,438, 4,450, 4,460
- 1 Day Implied Range: 0.66%
In QQQ support is at 376, then 370. Resistance is at the 380
Call Wall.
Eyes this morning are on the CPI report, which comes out at 8:30AM ET. Below is the SPX term structure, which reveals an slight backwardation due to this upcoming data point. The key here is that IV’s out past next week are very flat, with all IV’s <=13%. This is curve is essentially a reflection that there is some light hedging around CPI, but its not much cause for concern.
We anticipate that the CPI is a non-event, and its passing leads to light, supportive flows in equities. We are still operating with the view that a short term market high comes into play into tomorrow AM’s VIX expiration, and equities enter a window of weakness in through early next week.
This window of weakness is driven by two things:
- The expiration of large VIX put positions which were built up over the past several weeks.
- The building up equity call positions which are set to expire.
First, in regards to the VIX:
Recall that into Nov the VIX was pressing up near 20, and has now pushed down to 14. Shown here is open interest for Nov VIX Expiration, and you can see that OI is very large from the 20’s through 13. If CPI comes in around expectations, we would anticipate one final VIX press toward 14. With tomorrow’s expiration, that downside pressure is released allowing VIX/IV to move more freely.
The second factor here is the size of single stock equity calls expiring.
Shown here is the size of single stock
call delta
(purple) vs puts (teal). As you can see there is a large imbalance between the two for Nov OPEX (red). This implies that there could be sizable single stock call hedges in place, and the unwinding of those may lead to some short term weakness around OPEX as hedges are reset.
Further we’d point out that, for single stocks, this NOV OPEX is currently larger than Dec expiration. However, the opposite is true in the Index space wherein Nov is rather average, compared to a large Dec Expiration.
This implies that the single stock flows are more meaningful here, however there is still a notable call/put imbalance shown on the index side, too.
This view provides us with the following map into Dec OPEX:
Shown in yellow is where we project price action over the next week, with some OPEX consolidation pushing S&P prices into the mid 4,300’s. We think that any weakness in equities will be bought, and any corresponding pop in vol will be sold, which ultimately lifts the SPX to the 4,500-4,550 range into Dec 15th OPEX, which corresponds with Dec 13th FOMC.
We assign less probability to the downside, as it would require a hot CPI, or some other event which spikes rates. In this case, should we break 4,300 in the short term (pre-Thanksgiving), it could lead to a very sharp slide in SPX to the 4,000-4,100 area. This slide is due to the there being predominantly put positions <=4,300, and those puts would be energized into Dec OPEX. While that move may sound extreme, it is more or less in line with the move from the middle to the end of Oct.
SpotGamma Proprietary Levels
SPX
SPY
NDX
QQQ
RUT
IWM
Reference Price:
$4411
$440
$15483
$377
$1705
$169
SpotGamma Implied 1-Day Move:
0.66%
0.66%
SpotGamma Implied 5-Day Move:
2.01%
SpotGamma Volatility Trigger™:
$4370
$439
$15020
$376
$1750
$170
Absolute Gamma Strike:
$4400
$440
$15500
$375
$1700
$170
SpotGamma Call Wall:
$4450
$445
$15900
$380
$1690
$172
SpotGamma Put Wall:
$4000
$420
$15000
$345
$1700
$167
Additional Key Levels
SPX
SPY
NDX
QQQ
RUT
IWM
Zero Gamma Level:
$4353
$439
$14324
$373
$1753
$174
Gamma Tilt:
1.299
1.048
1.426
1.113
0.797
0.579
SpotGamma Gamma Index™:
1.817
0.042
0.052
0.044
-0.021
-0.10
Gamma Notional (MM):
$569.476M
$144.118M
$5.545M
$206.388M
‑$23.803M
‑$1.114B
25 Day Risk Reversal:
-0.039
-0.034
-0.035
-0.026
-0.026
-0.019
Call Volume:
535.169K
1.443M
10.615K
715.479K
16.407K
455.859K
Put Volume:
1.012M
1.796M
12.769K
992.021K
23.957K
696.41K
Call Open Interest:
7.314M
7.634M
63.147K
4.892M
291.602K
5.059M
Put Open Interest:
13.134M
13.831M
80.638K
8.496M
449.618K
7.756M
Key Support & Resistance Strikes
SPX Levels: [4500, 4450, 4400, 4300]
SPY Levels: [440, 438, 435, 430]
NDX Levels: [16000, 15500, 15200, 15000]
QQQ Levels: [380, 375, 370, 365]
SPX Combos: [(4623,75.39), (4601,97.20), (4575,81.35), (4562,73.83), (4548,96.46), (4526,87.18), (4513,94.95), (4509,87.74), (4500,99.48), (4491,85.65), (4482,83.26), (4473,96.14), (4469,93.11), (4464,84.59), (4460,96.81), (4456,90.63), (4451,99.93), (4447,87.21), (4438,96.23), (4434,82.99), (4429,92.10), (4425,98.50), (4420,94.08), (4412,91.67), (4398,98.13), (4372,73.61), (4341,72.29), (4323,82.18), (4310,81.87), (4301,91.97), (4275,77.25), (4248,88.91), (4226,72.84), (4209,77.02), (4200,94.92)]
SPY Combos: [444.22, 449.07, 441.58, 439.37]
NDX Combos: [15592, 15808, 16010, 15638]
QQQ Combos: [379.22, 384.13, 389.42, 381.49]
SPX Gamma Model
$3,552$4,002$4,452$5,294Strike-$1.9B-$1B-$184M$1.5BGamma NotionalPut Wall: 4000Call Wall: 4450Abs Gamma: 4400Vol Trigger: 4370Last Price: 4411
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