Futures up +35 handles this morning pushing negative gamma lower. VIX Index shifted into an area where we anticipate 2%-3% expected moves, as a result, volatility has increased. Volume seems muted which would imply little market movement, yet volatility is increasing.
SPY has large open interest at 270/280, 2700/2800 SPX rendering support, and resistance respectively. In addition, the 21d held yesterday, but price action could not manage a move back above the 9ema (275.98).
We’d anticipate any move above the 9ema (275.98) to stop at 280 (+/-) in the short-term, for the reasons depicted herein.
“As the market is currently in the middle of a band of larger open interest strikes, which could mean that trading tied to these strikes will keep the market contained to a zone between 2750–2800.” spot-gamma
S&P500 Most Active
These stocks were the most active on Tuesday. Despite the crude oil mess, many are from the energy sector. Watch these today for follow-through.
| SYM | LAST | CHG | % CHG |
|---|---|---|---|
| HP | 18.50 | +0.86 | +4.88% |
| FLIR | 40.60 | +1.63 | +4.18% |
| PXD | 74.03 | +2.75 | +3.86% |
| EFX | 130.13 | +4.32 | +3.43% |
| DRI | 63.55 | +1.76 | +2.85% |
| FANG | 31.50 | +0.64 | +2.07% |
| WAB | 49.96 | +1.01 | +2.06% |
| HES | 36.58 | +0.65 | +1.81% |
| LH | 148.24 | +2.63 | +1.81% |
| OTIS | 46.04 | +0.65 | +1.43% |
Finally, a catalyst is needed to move price action, both higher and lower. Moves higher will likely see waning dealer buying above the 2800 zone while retreating price action could bring out dealer sell volume.
Consequently, we aren’t anticipating much of a move above Wednesday’s overnight Globex session highs (2777 +/-), barring any unforeseen bullish catalyst that might hit the airwaves today. Therefore, we see greater risk to the downside. “Buying the dip” should be done with caution, and smaller size until VIX drops back below the 50d moving average.
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Happy Trading,
Vinny
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