Futures have made no move overnight, holding the 4015 area. We obviously look for relatively high volatility today, triggered by the 8:30AM ET CPI report. Resistance is at 4050 then 4100. Support shows at 4000 then 3960.
We cautioned that yesterday was the time to add some tail protection due to anticipated volatility. Our thought was that an increase in market movement would be triggered this AM, however the action picked up yesterday afternoon with that sharp market drop to 4000.
The move to 4000 brings more energy to the markets which should hold into next week. A benign CPI report could easily spark a rally back up into the 4100 level, while a hot reading could trigger a shift up in IV (i.e. VIX) and lead to a market test lower. Adding to this, we currently we see roughly 20% of S&P gamma rolling off with today’s expiration. This is rather large positioning for a non-monthly OPEX, and suggests heightened volatility for today into Monday.
4000 is a very large strike and we think it would take a major CPI deviation for the market to break this level and pin down to 3900. A probe lower is certainly possible, but we’d look for some mean reversion back to 4000 due to its gamma size.
A bad CPI report is not necessarily a reason to sell equities pre-FOMC, but we do think it would catalyze traders to purchase put protection, which inflates implied volatility. This means that vanna flows bring pressure to markets and keep them jumpy through Wednesday. Note that 30 strike in VIX as a high call open interest level, which may provide some VIX “resistance”.
| SpotGamma Proprietary Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 4017 | 4029 | 401 | 12269 | 299 |
| SpotGamma Imp. 1 Day Move: Est 1 StdDev Open to Close Range |
1.07%, | (±pts): 43.0 | VIX 1 Day Impl. Move:1.65% | ||
| SpotGamma Imp. 5 Day Move: | 2.48% | 4108 (Monday Ref Px) | Range: 4006.0 | 4210.0 | ||
| SpotGamma Gamma Index™: | -1.65 | -0.69 | -0.36 | 0.00 | -0.11 |
| Volatility Trigger™: | 4115 | 4110 | 410 | 11775 | 306 |
| SpotGamma Absolute Gamma Strike: | 4000 | 4000 | 400 | 12500 | 300 |
| Gamma Notional(MM): | -838.0 | -917.34 | -1610.0 | 2.0 | -657.0 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4248 | 4197 | 0 | 0 | 0 |
| Put Wall Support: | 4000 | 4000 | 400 | 12000 | 300 |
| Call Wall Strike: | 4200 | 4200 | 418 | 11800 | 310 |
| CP Gam Tilt: | 0.65 | 0.62 | 0.54 | 1.11 | 0.62 |
| Delta Neutral Px: | 4231 | ||||
| Net Delta(MM): | $1,889,198 | $1,782,629 | $193,060 | $59,326 | $119,788 |
| 25D Risk Reversal | -0.07 | -0.07 | -0.06 | -0.06 | -0.07 |
| Call Volume | 410,050 | 380,229 | 2,830,335 | 10,874 | 1,100,515 |
| Put Volume | 789,926 | 652,961 | 3,535,753 | 13,414 | 1,433,456 |
| Call Open Interest | 6,297,085 | 6,179,092 | 7,451,096 | 73,601 | 4,917,589 |
| Put Open Interest | 11,163,176 | 11,053,252 | 11,889,685 | 64,827 | 7,402,342 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4100, 4050, 4000, 3900] |
| SPY: [410, 405, 400, 395] |
| QQQ: [310, 305, 300, 290] |
| NDX:[13000, 12500, 12000, 11800] |
| SPX Combo (strike, %ile): [3905.0, 3953.0, 4098.0, 3978.0, 3909.0] |
| SPY Combo: [390.22, 395.04, 409.49, 397.45, 390.62] |
| NDX Combo: [12294.0, 12086.0] |
