This is a quick update to highlight the conflicting signals in the markets today. 28% of spy options expire today, which is quite large, but only 8% of S&P 500 options expire today. It is noted in the chart below that breadth is improving as the number of stocks trading about their 50 day moving average is improving. This indicates institutions are buying the dip. S&P 500 equal weight index is still in a range if we pull back today. 4372 is support.
“The gamma flip lines have pushed higher to the 4375 area from 4350. We think this is the result of ~14k short dated put options added to 4400 yesterday (therefore Monday this flip line likely changes sharply). The skew to the vanna model has shifted quite a bit from yesterday, too. This infers higher volatility today, and that a trip back to the 4420 area is just as quick as a visit lower. A close under 4400 is concerning for bulls, and under 4378 is a clear “risk off” signal into the weekend.” Brent at Spotgamma.com
On a side note, personal spending was higher than anticipated this morning, 1% vs. 0.70%. Watch consumer discretionary stocks for strength.
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Happy Trading,
Vinny
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