The S&P500, Russell 2000, Dow Industrials, and New York Stock Exhange are below the 50d again. In addition, the Nasdaq finally succumbed to gravity, joining the other US indices by slipping below its 50d moving average for the first time in 17 weeks.
Summary
ES and NQ Futures
Futures declined steadily during the Monday session. Once support was tagged around 3:30 PM EST, dealers started to cover.
S&P500 Index
Shortly after the opening range, price action on the S&P500 Index dropped below VWAP and never looked back, that was, until dealers were forced to cover.
Initial support at 4355 (+/-) held for nearly two hours. Weakness resumed into the evening session until price action reached a large gamma support level at 4310 (+/-).
At 3:20 PM the S&P500 staged a remarkable 50pt rally as dealers bought futures to cover their long delta options positions.
Vanna
You can see what the chart of Vanna on the right suggested “before” the opening bell. Any move higher (lower border – bottom) would force dealers to buy futures. Spotgamma
Additionally, this spotgamma model lays out where there are major inflection points in gamma position, which we believe can be key support and resistance lines. Brent went on to say, “we believe that when the gamma position changes it may invoke a “state change” in hedging, which we’d watch for at 4365 and 4315.”
We did watch for it. We have calls coming into the Tuesday session.
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Happy Trading,
Vinny
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