Futures are currently higher, near 3925. Key SG levels remain largely unchanged, with our major pivot level at 3910 (SPY 390 Call Wall), with resistance at 3950 & 4000 (SPX Call Wall). Support shows at 3870, 3860(SPY385) & 3850.
The bottom line here is that we have been on the lookout for a sharp rally in January (laid out here), and that a close above 3900 to generate that “risk on” signal. Friday we posted that we thought it would take 1-2 days to move into the 3900 area, and traders wouldn’t shift full “risk on” until digesting an update from Powell and/or the CPI.
Friday’s move did outpace our expectations, and we are looking for consolidation today around the 3900 level. As per the SPX plot below from Fridays AM note, we are bullish on a close over 3900 as there is little resistance until 4000. The trick here is Powell at 9AM ET tomorrow, which may inhibit bullish activity today as traders await his remarks.
In regards to that sharp rally on Friday (and per Fridays PM note), 0DTE call action was very heavy, particularly at the 3880-3900 strikes. We think this helped to drive the equity surge higher. For example, Over 150k total contracts traded at the 3900 strike on Friday, and >100k of those were for Fridays expiration.
Further, the fact that we do not see a shift higher in the SPY Call Wall (390) despite the ~2% rally on Friday suggests that longer term options traders were not aggressively positioning. Again, the challenge here for those with views >1 day is that markets have to contend with Powell’s speech tomorrow AM, and the CPI on Thursday, 1/12.
We think the cleanest thing to do here is to look at some longer dated calls. Its a guessing game as to how the market will react to Powell tomorrow, however we believe that given a dovish angle there could be a viscous rally with little resistance until 4000-4050. This presents a nice risk/reward, particularly if IV holds up into a rally due to a long call chase (i.e. VIX up, market up).
| SpotGamma Proprietary SPX Levels | Latest Data | SPX Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 3894 | 3898 | 388 | 11040 | 268 |
| SG Implied 1-Day Move:: | 1.25%, | (±pts): 49.0 | VIX 1 Day Impl. Move:1.33% | ||
| SG Implied 5-Day Move: | 3.0% | 3894 (Monday Ref Price) | Range: 3777.0 | 4011.0 | ||
| SpotGamma Gamma Index™: | -0.14 | -1.07 | -0.18 | 0.03 | -0.04 |
| Volatility Trigger™: | 3870 | 3855 | 388 | 11175 | 266 |
| SpotGamma Absolute Gamma Strike: | 4000 | 4000 | 390 | 11275 | 270 |
| Gamma Notional(MM): | -55.0 | -6.0 | -869.0 | 4.0 | -334.0 |
| Put Wall: | 3700 | 3700 | 380 | 10500 | 260 |
| Call Wall : | 4000 | 4100 | 390 | 11275 | 270 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 3926 | 3900 | 393.0 | 10710.0 | 299 |
| CP Gam Tilt: | 0.96 | 1.0 | 0.74 | 1.35 | 0.79 |
| Delta Neutral Px: | 3920 | ||||
| Net Delta(MM): | $1,429,844 | $1,479,519 | $145,253 | $41,439 | $79,405 |
| 25D Risk Reversal | -0.05 | -0.04 | -0.03 | -0.05 | -0.04 |
| Call Volume | 576,683 | 483,529 | 2,288,462 | 7,756 | 780,740 |
| Put Volume | 925,643 | 702,224 | 3,228,772 | 7,597 | 1,018,367 |
| Call Open Interest | 5,555,590 | 5,608,204 | 6,353,067 | 61,463 | 4,602,433 |
| Put Open Interest | 9,926,239 | 9,957,883 | 11,378,096 | 56,995 | 6,061,794 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4000, 3950, 3900, 3850] |
| SPY: [390, 385, 382, 380] |
| QQQ: [280, 270, 265, 260] |
| NDX:[12000, 11500, 11275, 11000] |
| SPX Combo (strike, %ile): [(4073.0, 74.81), (4066.0, 82.9), (4050.0, 78.81), (4030.0, 74.77), (3999.0, 93.68), (3976.0, 77.02), (3949.0, 86.97), (3925.0, 87.23), (3847.0, 78.88), (3816.0, 82.11), (3801.0, 94.04), (3773.0, 76.84), (3766.0, 75.97), (3750.0, 89.24), (3715.0, 77.72)] |
| SPY Combo: [378.77, 398.56, 373.72, 391.18, 393.51] |
| NDX Combo: [11272.0, 10676.0, 10886.0, 11085.0] |
