- Rallies into June OPEX should be categorized as “short covering” and subject to failure.
- The $3600 JPM 6/30 short put strike (3620) is our major downside support into June 30th.
- The $4285 JPM 6/30 long put strike is our major upside level into June 30th.
Daily Note:
Futures are near $3705, having reversed most of yesterdays gains. Support lies at 3700 followed by 3620. Resistance shows at 3755 (SPY 375). Powell speaks today at 9:30AM.
Much of today’s direction may be weighted by Powell’s remarks. Overall yesterdays options update did little to support the idea of a sustained bounce.
There were two problems with yesterdays rally. First, the HIRO deltas (purple line, below) in S&P + QQQ were flat to negative. This infers traders were selling calls and buying puts as the markets traded higher. We’d also note that with the exception of TSLA, most single stocks saw light positive delta flow. This is not the type of reaction bulls want to see if we’re on the cusp of a powerful rally.
Second, IV held up all day as measured by the VIX. Below is the VIX futures term structure and while there was a shift lower with the equity rally (black), VIX futures are to Fridays levels (green & orange). This is a signal that vol sellers were absent in the rally, and vol selling flow is a key component of short cover fuel.
While VIX didn’t do much, there is still not much demand for OTM puts. This is reflected these skew(SDEX, blue) and tail(TDEX, orange) readings shown below. This suggests that if markets start selling we may continue to see muted reactions in IV/VIX. We continue to be of the opinion that it will take credit events to pull a larger IV/VIX move.
In the end, if you wanted one core depiction of the current environment its best framed by the chart below. This chart of the MOVE Index vs VIX had been making the rounds in March & April, but MOVE started to decline into May.
The big 6/10 CPI print fed into increasing Fed rates and a renewed surge in bond implied volatility. If nothing else, this suggests that there remains a great deal of rate uncertainty which will make it difficult for equities to rally. If markets can’t get a handle on rate expectations it makes it very difficult to price assets of any kind.
| SpotGamma Proprietary SPX Levels | Latest Data | SPX Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 3764 | 3769 | 375 | 11546 | 281 |
| SpotGamma Imp. 1 Day Move: Est 1 StdDev Open to Close Range |
1.08%, | (±pts): 41.0 | VIX 1 Day Impl. Move:1.89% | ||
| SpotGamma Imp. 5 Day Move: | 2.8% | 3673 (Monday Ref Px) | Range: 3571.0 | 3776.0 | ||
| SpotGamma Gamma Index™: | -1.21 | -1.67 | -0.24 | 0.00 | -0.07 |
| Volatility Trigger™: | 4075 | 4075 | 380 | 11050 | 280 |
| SpotGamma Absolute Gamma Strike: | 4000 | 4000 | 380 | 11150 | 300 |
| Gamma Notional(MM): | -678.0 | -625.97 | -1201.0 | 1.0 | -524.0 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4103 | 4077 | 0 | 0 | 0 |
| Put Wall Support: | 3600 | 3600 | 370 | 10500 | 270 |
| Call Wall Strike: | 3810 | 4500 | 385 | 11150 | 292 |
| CP Gam Tilt: | 0.58 | 0.58 | 0.54 | 1.13 | 0.62 |
| Delta Neutral Px: | 4086 | ||||
| Net Delta(MM): | $1,495,100 | $1,382,137 | $152,191 | $50,147 | $98,147 |
| 25D Risk Reversal | -0.06 | -0.06 | -0.04 | -0.06 | -0.06 |
| Call Volume | 534,968 | 499,286 | 1,845,246 | 9,548 | 718,792 |
| Put Volume | 876,220 | 955,500 | 2,222,582 | 6,843 | 768,253 |
| Call Open Interest | 5,267,174 | 5,223,785 | 6,774,619 | 57,529 | 4,136,698 |
| Put Open Interest | 9,033,666 | 8,352,929 | 9,200,367 | 51,863 | 6,081,425 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4000, 3900, 3800, 3700] |
| SPY: [385, 380, 375, 370] |
| QQQ: [300, 290, 285, 280] |
| NDX:[12500, 12000, 11250, 11150] |
| SPX Combo (strike, %ile): [3690.0, 3791.0, 3739.0, 3708.0, 3840.0] |
| SPY Combo: [367.5, 377.63, 372.38, 369.38, 382.5] |
| NDX Combo: [11501.0, 11293.0] |
