The SPX closed 0.3 percent higher at 4001 points, just marginally above the level that seems to decide the fate of the free world.
Drivers of today’s price action were growth stocks (+0.9%), while value (-0.3%) underperformed amidst retreating yields (10Y -8.6 bps at 2.993%), which were pressured (among other things) by news that Shanghai was again tightening it’s Covid restrictions.
After closing below 4000 yesterday, the market was lifted by future buying overnight and then received an artificial boost pre market by comments from David Tepper.
At 9:30 the market got crushed again by comments from Loretta Mester who basically confirmed what Zoltan Pozsar telegraphed months ago, namely that the Fed intentionally tries to engineer volatility higher in order to bring inflation down via balancing demand and supply.
From a gamma perspective the wild swings around 4000 are exactly what one would expect at such a significant level for option dealers and market participants, before the market eventually rebalances to a new equilibrium level.
So far though puts are being added at lower and lower strikes (volume was the highest at 3300 today), but calls are not yet rolled lower in a meaningful way.
Implied dealer gamma registers at -1087MM and gamma “flips” at 4360 index points. Below 4000 the next big downside target is 3900, on the upside 4100 is in play.
Drivers of today’s price action were growth stocks (+0.9%), while value (-0.3%) underperformed amidst retreating yields (10Y -8.6 bps at 2.993%), which were pressured (among other things) by news that Shanghai was again tightening it’s Covid restrictions.
After closing below 4000 yesterday, the market was lifted by future buying overnight and then received an artificial boost pre market by comments from David Tepper.
At 9:30 the market got crushed again by comments from Loretta Mester who basically confirmed what Zoltan Pozsar telegraphed months ago, namely that the Fed intentionally tries to engineer volatility higher in order to bring inflation down via balancing demand and supply.
From a gamma perspective the wild swings around 4000 are exactly what one would expect at such a significant level for option dealers and market participants, before the market eventually rebalances to a new equilibrium level.
So far though puts are being added at lower and lower strikes (volume was the highest at 3300 today), but calls are not yet rolled lower in a meaningful way.
Implied dealer gamma registers at -1087MM and gamma “flips” at 4360 index points. Below 4000 the next big downside target is 3900, on the upside 4100 is in play.