Futures rallied overnight to 3770 after word of an ECB “emergency meeting“. We look for another high volatility day, with resistance at 3800 then 3850. Support shows at 3755 (SPY 375) then 3700.
The ECB news slides in just before we trigger several catalysts today. First is the 9AM ET VIX expiration, followed by the 2pm FOMC. The VIX is currently at 32 which is right between those 2 large calls strikes mentioned yesterday (30 & 35).
There could be a fair amount of ES movement around the 9AM ET hour as VIX contracts roll amongst a term structure that remains in contango. In addition to the roll traders need to maintain/adjust protection against the afternoon Fed.
In terms of the FOMC, we’re uncertain as to how markets will initially react. We do however feel that OPEX will provide some type of relief rally, the timing of which is path dependent.
If the Fed is read as neutral/bullish then we could get a rally into Fridays OPEX (blue dotted arrow) with 4000 the major overhead line to Friday. This would “pull forward” the OPEX rally fuel.
Conversely if the Fed upsets markets, we could see a test of the 3600 area into Friday OPEX (red arrow). We would then look for a short cover rally into Tuesday afternoon (Monday markets are closed), and short hedges adjust to the large puts rolling off.
Note that the 3700 level we’ve been highlighting reduced in size yesterday and so while we still view that as support, but it is now smaller. We now eye the 3600 level which coincides with the big JPM quarterly position. This is now major support (as discussed yesterday).
The “wildly bullish” scenario out into month end would be a test of the 4285 area which is where the long leg of the JPM put spread is.
Ultimately we think this OPEX (plus the June 30th) removes a lot of put hedges, which we think opens the market to lower lows heading into July.
| SpotGamma Proprietary SPX Levels | Latest Data | SPX Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 3736 | 3736 | 373 | 11311 | 275 |
| SpotGamma Imp. 1 Day Move: Est 1 StdDev Open to Close Range |
1.16%, | (±pts): 43.0 | VIX 1 Day Impl. Move:2.04% | ||
| SpotGamma Imp. 5 Day Move: | 2.49% | 3900 (Monday Ref Px) | Range: 3803.0 | 3997.0 | ||
| SpotGamma Gamma Index™: | -2.33 | -2.18 | -0.39 | -0.01 | -0.14 |
| Volatility Trigger™: | 4285 | 4000 | 470 | 11775 | 302 |
| SpotGamma Absolute Gamma Strike: | 4000 | 4000 | 380 | 11800 | 280 |
| Gamma Notional(MM): | -1201.0 | -1179.0 | -1952.0 | -2.0 | -958.0 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4196 | 4244 | 0 | 0 | 0 |
| Put Wall Support: | 3700 | 3700 | 370 | 11325 | 270 |
| Call Wall Strike: | 4700 | 4500 | 387 | 11800 | 315 |
| CP Gam Tilt: | 0.38 | 0.39 | 0.39 | 0.87 | 0.41 |
| Delta Neutral Px: | 4148 | ||||
| Net Delta(MM): | $2,127,885 | $2,072,448 | $221,469 | $63,601 | $130,965 |
| 25D Risk Reversal | -0.06 | -0.06 | -0.08 | -0.08 | -0.08 |
| Call Volume | 722,202 | 670,237 | 2,666,583 | 6,040 | 1,027,784 |
| Put Volume | 1,109,061 | 1,507,642 | 3,462,275 | 4,711 | 1,232,624 |
| Call Open Interest | 6,813,242 | 6,612,547 | 8,042,015 | 77,243 | 5,279,343 |
| Put Open Interest | 11,366,294 | 11,156,092 | 11,983,755 | 74,341 | 7,582,853 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4000, 3900, 3800, 3700] |
| SPY: [385, 380, 375, 370] |
| QQQ: [300, 290, 280, 270] |
| NDX:[12500, 12000, 11800, 11500] |
| SPX Combo (strike, %ile): [3702.0, 3800.0, 3650.0, 3751.0, 3725.0] |
| SPY Combo: [370.51, 380.23, 365.27, 375.37, 372.75] |
| NDX Combo: [11074.0, 11278.0, 11481.0] |
