Volatility has resurfaced this morning, with futures sharply lower to 4180. This technically places markets back into a negative gamma stance across the S&P and QQQ. 4200 is the key resistance line above, followed by 4250. Support shows at 4160 (SPY 415), then 4100.
We’re kicking off a new OPEX cycle today, with focus shifting on how positions build into what will be a very large quarterly September expiration. Usually these post-OPEX price contractions are short lived (1-2 sessions), however we have larger concerns here due to the magnitude of the markets recent rally (+10% over a few weeks).
The rally coincided with very bullish IV skew (ex: our Risk Reversal at -0.04, as outlined last week). Some demand now shifting back into puts can lead to jumpy IV, which adds downside stock pressure. For this reason, watching IV (or simply the VIX) from the open will be critical. If IV/VIX gets crushed off of the open it suggests that traders are still in buy the dip mode.
Along with monitoring IV/VIX, 4200 is the major S&P level to watch. If the VIX declines & the S&P retakes 4200 today, then we’d label this decline as simply an “OPEX correction” and not a “new bear”. In this scenario, we’d forecast volatility to continue contracting in the days ahead, and a retest of the 4300 Call Wall by months end.
Conversely, the combination of remaining <4,200 with building IV (i.e. VIX) implies the pressure is building for a larger downside swing. 4160 (SPY 415) – 4150 is a light support area, with 4110 (SPY 410) being more solid support.
|SpotGamma Proprietary SPX Levels||Latest Data||SPX Previous||SPY||NDX||QQQ|
|SpotGamma Imp. 1 Day Move:
Est 1 StdDev Open to Close Range
|1.14%,||(±pts): 48.0||VIX 1 Day Impl. Move:1.29%|
|SpotGamma Imp. 5 Day Move:||2.77%||4228 (Monday Ref Px)||Range: 4111.0 | 4345.0|
|SpotGamma Gamma Index™:||0.21||1.02||-0.13||0.03||-0.09|
|SpotGamma Absolute Gamma Strike:||4000||4300||420||13250||325|
|Additional Key Levels||Latest Data||Previous||SPY||NDX||QQQ|
|Zero Gamma Level:||4205||4236||424.0||12345.0||338|
|Put Wall Support:||4000||4000||400||11000||320|
|Call Wall Strike:||4300||4350||430||13250||340|
|CP Gam Tilt:||1.06||0.95||0.79||1.45||0.67|
|Delta Neutral Px:||4130|
|25D Risk Reversal||-0.06||-0.04||-0.06||-0.06||-0.07|
|Call Open Interest||5,890,469||6,627,516||6,724,681||60,395||3,780,730|
|Put Open Interest||10,184,461||11,616,964||11,714,049||70,669||6,932,995|
|Key Support & Resistance Strikes:|
|SPX: [4300, 4250, 4200, 4000]|
|SPY: [430, 425, 420, 415]|
|QQQ: [330, 325, 320, 300]|
|NDX:[14000, 13250, 13000, 12500]|
|SPX Combo (strike, %ile): [4300.0, 4351.0, 4326.0, 4309.0, 4275.0]|
|SPY Combo: [429.32, 434.38, 431.85, 430.16, 426.78]|
|NDX Combo: [13256.0, 13124.0, 12925.0]|