Futures are markedly higher, trading to 3984. Our volatility estimates, and the markets vol pricing, remain unchanged with SG implied move at 1.2%, and VIX implying a 2% SPX 1 day move. First resistance is at 4000-4015(SPY 400 equivalent), and then 4200. Support lies at 3950 then 3900.
Outside of the very large 4000 strike, the call positions remain light. We note that in particular the strikes above hold little in the way of call gamma, and so there is little to offer resistance above 4000. And as per our note yesterday, it just seems like the market is “full up” on downside protection, and chasing higher IV’s/short-sale risks remain high (ie. you can get face-ripping rallies here).
This is just a very lopsided, unbalanced market. It seems like no one is looking to buy as shown below. This plots aggregate call & put volume for stocks in the S&P500. Note that the call volumes are near lows, with put volumes at highs.
To this point – its critical to recall that from our perspective there is not catalyst to close out puts until 5/20, and so rallies are considered short covering. These can lead to violent moves higher, but are also subject to swift reversals. We will continue to frame rallies as short covering until we see material call positions enter the market.
Highlighting the risk of shorting, it seems like something snapped yesterday. We highlighted the ~10AM odd short covering in meme-names which felt very much like a forced buyer. Take GME, for example which jumped from $77 to $108 in about 20mins of trading. Move of this move quickly reverted with GME closing at $90.
Interestingly this flow showed up in our HIRO indicator with a jump in coordinated positive delta trades (long calls/short puts) across many “low quality” names ie: AMC, GME, BB, CLOV (more charts here). Several traders also noted a change in skew both in the SPX, but also in some large single stock names right as the market felt very “capitulatory” around mid-day.
This leads us to wonder if the “natural selling pressure” we noted yesterday is exhausted, as more positions are unwound. If so, this could lead to a rather large short covering rally as put positions melt via time decay (charm) into 5/20 and vol drops (vanna).
If we can recover the 4000 level the we think upside pressure builds opening a rather quick recovery into 4200 for early next week. Without recapturing 4000 then this could simply be a nasty bear trap and we continue to watch 3800 for material support.
On an admin note, we wanted to let you all know we were part of an amazing documentary on “meme-mania”. Its called “Diamond Hands” and it premiers on MSNBC this Sunday at 10PM ET (then on Peacock streaming).
| SpotGamma Proprietary Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 3930 | 3930 | 392 | 11945 | 291 |
| SpotGamma Imp. 1 Day Move: Est 1 StdDev Open to Close Range |
1.24%, | (±pts): 49.0 | VIX 1 Day Impl. Move: 1.89% | ||
| SpotGamma Imp. 5 Day Move: | 2.99% | 4123 (Monday Ref Px) | Range: 4000.0 | 4247.0 | ||
| SpotGamma Gamma Index™: | -2.10 | -2.1 | -0.35 | -0.03 | -0.10 |
| Volatility Trigger™: | 4350 | 4350 | 430 | 13600 | 328 |
| SpotGamma Absolute Gamma Strike: | 4000 | 4000 | 400 | 12000 | 300 |
| Gamma Notional(MM): | -1064.0 | -1063.98 | -1684.0 | -4.0 | -617.0 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4347 | 4280 | 0 | 0 | 0 |
| Put Wall Support: | 3700 | 3700 | 380 | 12000 | 300 |
| Call Wall Strike: | 4700 | 4700 | 450 | 14000 | 330 |
| CP Gam Tilt: | 0.45 | 0.46 | 0.43 | 0.59 | 0.55 |
| Delta Neutral Px: | 4298 | ||||
| Net Delta(MM): | $1,882,810 | $1,882,810 | $199,265 | $53,767 | $116,317 |
| 25D Risk Reversal | -0.08 | -0.08 | -0.06 | -0.1 | -0.08 |
| Call Volume | 681,996 | 681,996 | 2,971,743 | 11,568 | 1,552,297 |
| Put Volume | 1,379,380 | 1,379,380 | 3,801,328 | 18,138 | 1,693,150 |
| Call Open Interest | 5,848,399 | 5,848,399 | 7,543,729 | 63,163 | 5,347,069 |
| Put Open Interest | 10,493,510 | 10,493,510 | 10,709,540 | 60,870 | 6,454,014 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4200, 4000, 3900, 3700] |
| SPY: [400, 395, 390, 380] |
| QQQ: [300, 295, 290, 280] |
| NDX:[14000, 13000, 12400, 12000] |
| SPX Combo (strike, %ile): [3899.0, 4001.0, 3851.0, 3950.0, 3875.0] |
| SPY Combo: [389.2, 399.4, 384.49, 394.3, 386.85] |
| NDX Combo: [11898.0, 11695.0] |
