Informe SG Levels

Futures have pushed lower to 3930. Support is at 3900 (Put Wall) with resistance at 3951 then 4000. The Put Wall is the bottom of our trading range, and a break below that level signals the market is oversold – until/unless the Put Wallrolls lower.

The key flow from yesterday is puts, which were net closed >=400/4000 and rolled lower. This keeps negative gamma active, and comes from puts which are more likely short dated. Along these lines note that SPY & QQQ are the much more active index/ETF complexes vs SPX. They both exhibit larger negative gamma complexes vs SPX, suggesting larger, more impactful put positions in the short term.

The issue here for markets, as we’ve discussed, is that we’re now in this downside feedback loop. Increasing IV + negative gamma keeps the pressure on markets and volatility elevated. Without an options expiration and/or a major data point there is little to break that feedback loop. Friday’s jobs report is likely that short term catalyst.

In the chart above we’ve marked expiration and other key events in an attempt to highlight not only the importance of price, but also time. We think that with markets caught in this feedback loop, September OPEX will likely be the major, key turning point which breaks the loop. You can see evidence of this in/around June expiration.

A positive jobs report tomorrow could provide some short term relief, but unless large put positions are sold/closed, then any rally is likely to fade.