OANDA:SPX500USD   S&P 500 Index
Good morning.

The S&P 500 future trades 0.9 percent below fair value, with Target (-22.5% pre-market) setting a negative tone after missing EPS estimates.

Asien markets closed mostly positive with the Nikkei up 0.9 percent and the Hang Seng up 0.2 percent. The Chinese housing market continues to cool down as data shows (housing prices up 0.7% after 1.5% previously), while Japan’s economy contracted less than expected in the first quarter (-0.2% vs 0.4% expected and 0.9% previously).

Over in Europe the Euro Stoxx 50 is down 0.8 percent after inflation data showed an increase in prices of 7.4 percent year-over-year (7.4% expected, 7.4% previously).

In the USA investors received Mortgage Applications, which declined 11 percent compared to last week, adding to concerns that a hard landing is maybe inevitable, while Building Permits for April, were largely in-line as well as housing starts.

Markets will continue to digest Powell’s hawkish remarks from yesterday, and keep a close eye on oil (up 1.2%), long-term yields (up 3.8 bps ) and possibly rising rate hike expectations.

Gamma discussion:

Dealer gamma currently registers –826MM, while gamma inverts at 4300 points.

I do not observe not much re-balancing on the put side ahead of OPEX, but some calls are being added between 4000 and 4100. While usually big investors are selling calls to finance their puts there is some chatter recently, that long calls are accumulated to get some upside exposure to a possible rally after OPEX without committing to much capital.

I continue to see 4000 as the most critical strike and a good support, while 4100 continues to be a local resistance level .

Nevertheless the market stays highly fragile due to the extreme gamma environment and big moves beyond those strikes should always be factored in.

** The horizontal line at about 3800 is an artefact.

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