Macro Theme:

 

 

Founder’s Note:

ES futures are +40bps at 5,582. NQ futures are +60bps at 20,323

Key SG levels for the SPX are:

• Support: 5,493, 5,462, 5,450, 5400
• Resistance: 5,500, 5,510
• 1 Day Implied Range: 0.58%

For QQQ:

• Support: 485, 480, 469
• Resistance: 490

IWM:

• Support: 200, 195
• Resistance: 202, 205

ES futures are indicating an SPX open just above our major resistance range of 5,500-5,510 (SPY 550

Call Wall

). We would anticipate that this range would remain sticky for today, as 5,500 is the largest gamma strike into tomorrow’s expiration.

This move is now playing into an OPEX time window which could result in some equity contraction, after a period of significant strength. We’re set to lose about 1/3 of the SPX positive gamma with OPEX.

We do note a lot of positions building up at 5,550, as marked below. At a high level, this suggests that the SPX

Call Wall

could roll higher, which would raise the top end of our trading range (from 5,500, currently). This gamma-strike growth above results from the cadence of the SPX grinding higher each day, with new positions being added above. Additionally, we have the incredible moves in major single stocks, which serve to pull the index higher.

A chunk of this large gamma at 5,550 is likely to remain post-OPEX, which is awfully close to the big end-of-quarter (6/28) gamma held at the 5,570 JPM collar strike. This area is one to highlight for the SPX into the end of June.

While we are looking for weakness and a test of 5,400 post-OPEX, we need to present all sides.

These positions near 5,550-5,570 may put a short term kink in our plan for OPEX consolidation. The idea is that if we remain >5,500 these end-of-month positions keep the SPX positive gamma stability in place, and the attention on the JPM collar may keep attention up in that price area. Additionally, if we were to rally up to that 5,550 area today & tomorrow, it likely leads to a stronger SPX support over the next week, into month-end.

The blistering move in single stocks is led by NVDA, “the King”, in front of tomorrow’s XLK rebalance. This rebalance, adds ~$10bn of XLK buying for NVDA, and ~ -$10bn of selling for AAPL. While traders think this is a major boon for NVDA this week (+10% last 5 days), it doesn’t appear to be stopping AAPL’s stock (+3.5% last 5 days). Interestingly that $10bn in volume is about 1 day of volume for AAPL, but only 1/4 of a day’s volume for NVDA.

While the XLK is clearly going to add some NVDA buying pressure, that buying is feeding into a nasty negative gamma complex in NVDA that leads to dealers having to buy more stock as the stock goes higher (gamma squeeze). Consider Tuesday’s NVDA 38 million

call volume

– it was the largest daily

call volume

in the US options market. That is more

call volume

than SPY, AAPL, TSLA & SPX combined.

NVDA is set to lose about 1/2 its gamma with tomorrows expiration, which could serve to stall its momentum. Further, we see very little in the way of open interest >140.

This single stock volatility breeds instability. In our view, you cannot have an extremely volatility “stock up, vol up” move which settles into a “stock flat, vol down” move. Its more likely a “stock down, vol stays up” scenario.