Macro Theme:
- $4,300 (Vol Trigger) is our key resistance line into Friday 5/6/2022.
- A break of $4,200 invokes our “lower bound” concept
- We see substantial, longer-term support at $4,050 due to large open interest at $4,000.
- A close over $4,300 signals an extended rally into 5/20 OPEX.
Daily Note:
Futures are off 50bps to 4115. Traders are watching the 8:30AM ET jobs report closely today. We anticipate another volatile day with a cluster of support lines in the 4100-4125 area. Under 4100 we see 4050 as major support. Resistance is at 4200.
Yesterdays move seemed to shake sentiment. However, as we noted last night the selloff brought the S&P only down ~12 handles vs Wednesdays open, and the VIX didn’t come near Mondays high of 36. Yes, there was a tremendous amount of velocity to the selling, but interestingly just as the S&P gained 3% in the last 1.5hrs on Wednesday it lost 3% in the first 1.5hrs yesterday.
We’ve been framing the 4,000 area as major support, and a lower bound. Shown below is the current gamma at 4,000, and this level would grow in size if the S&P were to drop another 2-3% (gamma is highest ATM). Further both our delta & gamma tilt readings are near the historical lower bound, suggesting “max puts”.
What breaks our “lower bound” thesis is if something breaks in markets: forced liquidations, credit events, etc. To this point we had some very large declines in bonds (particularly the long end ex: TLT -3%), and credit spreads are rising. However we’d argue the equity selling has been ugly, but orderly.
We’re something to “break” we’d look for equity vol to catch an outsized bid as traders, looking to hedge defaults, source S&P put protection.
To this point we’ve plotted QQQ ATM IV for options 30 days out (purple) to 120 days(yellow). As you can see the whole term structure (i.e. all days) is near YTD highs but IV’s are not exceeding highs. This, even though QQQ is at new lows.
Just as we are viewing this 4,000 area as huge support, there are not material reasons for traders to step in and buy dips/sell vol. From a positioning standpoint, its still not until 5/20 OPEX wherein we see some decent puts expiring, which could fuel an equity rally. We’re therefore operating from a baseline view similar to late Feb-early March wherein we had large, volatile swings but the S&P essentially went nowhere. Accordingly, rallies can be violent but should be viewed as primarily short covering and subject to quick reversals.
| SpotGamma Proprietary Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 4146 | 4150 | 413 | 12850 | 313 |
| SpotGamma Imp. 1 Day Move: Est 1 StdDev Open to Close Range |
1.23%, | (±pts): 51.0 | VIX 1 Day Impl. Move:2.0% | ||
| SpotGamma Imp. 5 Day Move: | 2.81% | 4128 (Monday Ref Px) | Range: 4013.0 | 4245.0 | ||
| SpotGamma Gamma Index™: | -1.67 | -0.51 | -0.33 | -0.02 | -0.11 |
| Volatility Trigger™: | 4300 | 4285 | 430 | 13950 | 325 |
| SpotGamma Absolute Gamma Strike: | 4000 | 4300 | 420 | 14050 | 300 |
| Gamma Notional(MM): | -834.0 | -914.39 | -1454.0 | -2.0 | -638.0 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4384 | 4388 | 0 | 0 | 0 |
| Put Wall Support: | 4000 | 4000 | 400 | 13000 | 300 |
| Call Wall Strike: | 4700 | 4700 | 450 | 14050 | 350 |
| CP Gam Tilt: | 0.59 | 0.54 | 0.52 | 0.76 | 0.59 |
| Delta Neutral Px: | 4367 | ||||
| Net Delta(MM): | $1,748,344 | $1,578,333 | $187,144 | $40,441 | $101,755 |
| 25D Risk Reversal | -0.1 | -0.09 | -0.09 | -0.08 | -0.07 |
| Call Volume | 638,076 | 414,908 | 3,380,856 | 4,210 | 1,494,936 |
| Put Volume | 1,025,518 | 839,790 | 4,423,495 | 4,334 | 1,641,006 |
| Call Open Interest | 5,472,619 | 5,246,888 | 6,574,786 | 51,776 | 4,380,560 |
| Put Open Interest | 10,369,872 | 10,096,419 | 10,842,305 | 49,262 | 6,078,250 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4300, 4200, 4125, 4000] |
| SPY: [430, 420, 410, 400] |
| QQQ: [320, 315, 310, 300] |
| NDX:[14050, 14000, 13500, 13000] |
| SPX Combo (strike, %ile): [4101.0, 4151.0, 4051.0, 4201.0, 4110.0] |
| SPY Combo: [409.26, 414.22, 404.29, 419.19, 410.09] |
| NDX Combo: [12722.0, 12516.0, 13133.0] |
