Futures were quiet overnight, holding 4130. There is a band of resistance above at 4140 (Vol Trigger), 4150 & 4160 (SPY 415). Support shows at 4110 (SPY 410) & 4100.
Yesterdays session, and the overnight were remarkably quiet as traders await Jackson Hole which kicks off tomorrow. Powell, however, speaks Friday at 10AM. We note that call positions are filling in around 4150, which is why our Vol Trigger continues to slide lower to 4140 (from 4225 Monday).
The fact that no event is taking place today may bring traders to sell IV tied to today’s expiration, which may lead to another quiet day.
To this point the positions are largest in SPY, with 410, 415 and 420 the prominent strikes. Further, our models show 20-25% of total of S&P gamma expiring between Wednesdays & Fridays session. That figure is likely to build as traders jockey short dated positions around Powell’s Friday speech.
Despite yesterdays very calm session and build in this-weeks gamma, IV continues to hold its bid, as shown by the VIX near 3 week highs. Again, we anticipate little change to that elevated IV until after the Fed’s meetings this week. As discussed in our previous note, this higher IV will provide plenty of fuel for a substantial move into next week. We are still watching 4300 and 4000 as major levels.
Its important to flag the MOVE Index here as well. While this measure of bond volatility declined sharply after recent CPI & FOMC events, the metric is back near recent highs. The 10Y is also back above 3%. As we’ve discussed at length, without bond volatility subsiding we do not think equity markets can stage long term, stable rallies. Powell will certainly trigger the next directional changes in rates & equities.
A quick note on the Vol Trigger (VT). This is one of our primary signals, and we assign a bullish edge to markets while they’re above the VT. The implication here is that while above the VT, markets should be building positive gamma positions, which reduces volatility. Lower volatility is linked to more positive equity returns.
Its important to note this Vol Trigger metric not only coming down in strike, but we’d like to see it stabilize (i.e. remain at the same strike for several sessions). This stability comes from longer term positions which provides a more concrete metric. The VT is likely to flicker in through Friday, however overall we’d note the lower VT is derived through the addition of call positions. Higher VT suggests calls were closed and/or puts added.
| SpotGamma Proprietary SPX Levels | Latest Data | SPX Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 4127 | 4130 | 412 | 12881 | 314 |
| SpotGamma Imp. 1 Day Move: Est 1 StdDev Open to Close Range |
1.06%, | (±pts): 44.0 | VIX 1 Day Impl. Move:1.51% | ||
| SpotGamma Imp. 5 Day Move: | 2.77% | 4228 (Monday Ref Px) | Range: 4111.0 | 4345.0 | ||
| SpotGamma Gamma Index™: | -0.59 | -0.5 | -0.25 | 0.03 | -0.12 |
| Volatility Trigger™: | 4140 | 4175 | 413 | 12850 | 322 |
| SpotGamma Absolute Gamma Strike: | 4000 | 4000 | 410 | 13250 | 310 |
| Gamma Notional(MM): | -378.0 | -411.43 | -1206.0 | 3.0 | -782.0 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4167 | 4201 | 421.0 | 12375.0 | 331 |
| Put Wall Support: | 4000 | 3900 | 410 | 11000 | 300 |
| Call Wall Strike: | 4300 | 4300 | 430 | 13250 | 325 |
| CP Gam Tilt: | 0.85 | 0.79 | 0.66 | 1.28 | 0.58 |
| Delta Neutral Px: | 4124 | ||||
| Net Delta(MM): | $1,746,855 | $1,686,670 | $197,125 | $54,073 | $105,991 |
| 25D Risk Reversal | -0.07 | -0.06 | -0.07 | -0.07 | -0.08 |
| Call Volume | 376,199 | 487,883 | 2,008,546 | 5,340 | 798,480 |
| Put Volume | 563,643 | 905,651 | 2,566,929 | 5,337 | 876,170 |
| Call Open Interest | 5,991,102 | 5,988,870 | 7,112,085 | 60,665 | 4,026,613 |
| Put Open Interest | 10,477,442 | 10,158,360 | 12,216,123 | 76,010 | 7,185,545 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4200, 4150, 4100, 4000] |
| SPY: [420, 415, 410, 400] |
| QQQ: [325, 315, 310, 300] |
| NDX:[14000, 13250, 13000, 12500] |
| SPX Combo (strike, %ile): [4049.0, 4103.0, 4074.0, 4198.0, 4124.0] |
| SPY Combo: [404.52, 409.88, 406.99, 419.36, 411.94] |
| NDX Combo: [13255.0, 12714.0, 12792.0] |
