Futures are up to 3765 ahead of the big 8:30AM ET CPI print. Key SG levels remain largely unchanged, with resistance above at 3800 & 3850. Support shows at 3700 then 3659. Short dated volatility remains extremely elevated, with IV indicating that traders are looking for a +2% SPX move today.
Our overall view remains in line with that outlined a few day ago: we anticipate todays CPI sparking a large directional move that is reinforced by 11/18 OPEX, resulting in a test of either 4000 above, or down to the 3600 Put Wall.
We mark the range from 3600 up to 4000 as rather fluid due to small gamma positions. This, coupled with the “alert” IV position, leads us to look for the extended directional move.
Below we’ve plotted the current size of put & call gamma positions by historical percentile, and we generally only mark strikes >97.5% as material in size (recall that gamma is highest for at-the-money options). As you can see put strike at 3700 is significant – but that is all within 1% of current futures prices. Note, too, the 4000 strike is currently large even though it is nearly +5% OTM – and this is why we mark it as major resistance.
Finally, we draw your attention to the fact that down below 3700 the positions are purely puts which suggests that below that level there should be a strong increase in negative gamma which is linked to increases in overall market volatility.
On this point of volatility (and as noted yesterday), it does seem that there has been an uptick in some OTM hedge demand. This is reflected in both the SKEW index and VIX, shown below. This bump is likely driven by the crypto-carnage, which halted vol sellers momentum into todays CPI.
From a more macro view, we can see that the MOVE index (aka Bond VIX) is down sharply after the FOMC which indicates some stress in the bond market may be easing. This is because the MOVE index measures at-the-money IV in treasury bonds, and therefore a higher(lower) MOVE index indicates traders expect more(less) volatility in rate markets.
We have been tracking the MOVE index as our major indicator of macro risk (see here), and think that its continued decline is a positive signal for equities. A hot CPI likely shifts this index higher, and equities lower, but a “meet or beat” CPI likely leads to a sharp decline in equity IV, which boosts equities.
| SpotGamma Proprietary SPX Levels | Latest Data | SPX Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 3749 | 3749 | 374 | 10797 | 263 |
| SG Implied 1-Day Move:: | 1.0%, | (±pts): 37.0 | VIX 1 Day Impl. Move:1.64% | ||
| SG Implied 5-Day Move: | 3.15% | 3900 (Monday Ref Price) | Range: 3778.0 | 4023.0 | ||
| SpotGamma Gamma Index™: | -1.03 | -1.03 | -0.34 | 0.01 | -0.11 |
| Volatility Trigger™: | 3820 | 3780 | 384 | 11000 | 270 |
| SpotGamma Absolute Gamma Strike: | 4000 | 4000 | 375 | 11050 | 270 |
| Gamma Notional(MM): | -598.0 | -637.0 | -1762.0 | 3.0 | -767.0 |
| Put Wall: | 3600 | 3600 | 360 | 10500 | 260 |
| Call Wall : | 3900 | 3900 | 385 | 11050 | 282 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 3852 | 3887 | 390.0 | 10461.0 | 290 |
| CP Gam Tilt: | 0.73 | 0.96 | 0.55 | 1.27 | 0.57 |
| Delta Neutral Px: | 3831 | ||||
| Net Delta(MM): | $1,604,780 | $1,612,733 | $193,801 | $40,662 | $99,109 |
| 25D Risk Reversal | -0.04 | -0.06 | -0.02 | -0.02 | -0.01 |
| Call Volume | 500,745 | 549,096 | 1,671,400 | 8,288 | 780,579 |
| Put Volume | 809,450 | 819,271 | 2,519,454 | 9,164 | 1,271,929 |
| Call Open Interest | 6,789,939 | 6,478,005 | 8,163,680 | 70,215 | 5,225,916 |
| Put Open Interest | 11,293,708 | 11,614,439 | 14,049,220 | 55,253 | 6,920,767 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4000, 3900, 3800, 3700] |
| SPY: [380, 375, 370, 365] |
| QQQ: [275, 270, 265, 260] |
| NDX:[12000, 11500, 11050, 11000] |
| SPX Combo (strike, %ile): [(3899.0, 85.8), (3835.0, 79.96), (3757.0, 75.05), (3749.0, 82.27), (3727.0, 81.52), (3708.0, 75.31), (3700.0, 95.32), (3674.0, 82.73), (3659.0, 87.79), (3652.0, 94.49), (3625.0, 85.12), (3607.0, 84.02), (3599.0, 96.55), (3577.0, 78.21)] |
| SPY Combo: [359.16, 369.27, 364.4, 365.15, 389.1] |
| NDX Combo: [10657.0, 11046.0, 10862.0, 10452.0, 11067.0] |
