Futures were quiet overnight, holding 3830. Markets await the 8:30AM ET CPI report, which likely determines todays initial market direction. With that, we see volatility relatively high today with resistance at 3850 and 3900. 3800 is critical support, under there we see a likely test of 3740.
Both 3900 and 3740 are ~1.2% (SG est implied move) moves from current ES levels and seem to be in play for this session.
Here are our basic views off of various CPI outcomes:
- A hotter than expected CPI number likely brings a test of the 3700 Put Wall, and keeps pressure on equities in through FOMC. If we are near 3700 into Friday, we’d anticipate a light OPEX-induced bounce.
- A benign CPI reading may bring some relief and a retest of 3900. Unless it’s a number well under expectations, we think any ensuing rally would likely fade as markets re-bid volatility into FOMC.
- A CPI print well under expectations could bring a more significant rally, with 4000 achievable into next Tuesday (last trading day before VIX exp). We consider 4000 major resistance into FOMC (7/27).
Obviously the “hotter than expected” reading is what will produce the most volatility. Over a multi-day timeframe, under 3800 we see a high rate of gamma change (aka steepness of the slope below) down to 3600. We’ve also been of the view that traders have been short volatility, and a high CPI print could force a short volcover, which further drives downside volatility.
|SpotGamma Proprietary SPX Levels||Latest Data||SPX Previous||SPY||NDX||QQQ|
|SpotGamma Imp. 1 Day Move:
Est 1 StdDev Open to Close Range
|1.2%,||(±pts): 46.0||VIX 1 Day Impl. Move:1.71%|
|SpotGamma Imp. 5 Day Move:||2.98%||3899 (Monday Ref Px)||Range: 3783.0 | 4015.0|
|SpotGamma Gamma Index™:||-1.06||-0.61||-0.30||-0.00||-0.06|
|SpotGamma Absolute Gamma Strike:||3800||4000||380||12500||280|
|Additional Key Levels||Latest Data||Previous||SPY||NDX||QQQ|
|Zero Gamma Level:||4007||3953||0||0||0|
|Put Wall Support:||3700||3700||370||11000||280|
|Call Wall Strike:||4005||4000||390||11150||295|
|CP Gam Tilt:||0.69||0.64||0.54||1.07||0.73|
|Delta Neutral Px:||4023|
|25D Risk Reversal||-0.08||-0.07||-0.07||-0.07||-0.07|
|Call Open Interest||5,783,554||5,743,162||7,104,783||67,564||4,564,366|
|Put Open Interest||9,921,939||9,283,983||11,348,176||64,882||6,477,354|
|Key Support & Resistance Strikes:|
|SPX: [4000, 3900, 3850, 3800]|
|SPY: [385, 380, 375, 370]|
|QQQ: [300, 290, 285, 280]|
|NDX:[12500, 12000, 11800, 11150]|
|SPX Combo (strike, %ile): |
|SPY Combo: |
|NDX Combo: [11907.0]|