The SPX closed 0.5 percent higher with mega-cap tech stocks underperforming (+0,1%) and an equal-weight basket outperforming (+0.9%).
Striking was the fact that investors seem to remain super-calm ahead of tomorrow’s path breaking FOMC decision, as expressed by the VIX which dropped below 30 percent and the Nations Taildex Index (see chart below) which declined 4.4 points to 18.6 percent.
This particular Index measures the likelihood of an extreme drop in equity prices by creating a synthetic out-of-the-money put option and is signaling that investors do not price in a black swan outcome on Wednesday.
Implied dealer gamma consequently improved by 72MM to -806MM, while put volume was relatively muted relative to earlier days.
Puzzling is also the fact, that the reduced risk-awareness was not a function of declining rate hike expectations aka expectations of a more “dovish” Fed, and future markets continued to price in eleven hikes for the year (see chart below).
Is this the setup for a perfect multi standard deviation event? Or is tomorrow’s meeting overhyped? Discuss!
Maybe the market is forward-looking and all of this is priced in...
GammaLab
⋅
@StockSniper00, the statement and other notes will probably not convey much new information, true, but the press conference could be unpredictable.
Tradersweekly
⋅
Thank you nicely!
akatsiya
⋅
a lot of bad news but all the bad news are known to the market. sell the news event tom unless fed says something really terrible will they? considering gdp -1.4% inflation is unpopular but so does the unemployment if they kill the economy Powel knows how to flip flop. unless he wants to say something he not gonna say it