OANDA:SPX500USD   S&P 500 Index
Good morning.

Global markets are up sharply today: Hang Seng +2.7%, Nikkei +2-6%, Euro Stoxx 50 +2.3%, while Bitcoin is back over 30K with a gain of 5.7%.

Fundamentally not much has changed, but there are glimmers of hope here and there that cause the extremely overbought markets to rally. For example:

1) Shanghai's vice mayor reportedly said that his city aims to have no community spread of the coronavirus by the middle of this month.
2) Bank of Japan Governor Kuroda said that continued easing is needed to sustainably reach the 2.0% inflation target.
3) European Central Bank policymaker Centeno said that inflation is expected to remain high this year and that policymakers should not overreact when normalizing policy.
4) Turkey is reportedly opposed to admitting Finland or Sweden into NATO.

Today is option expiry and puts are being closed (and to some extend rolled) at 3700 and 3800, which is allowing dealer to buy back some shares of the underlying and provide some much need liquidity, albeit this effect is rather modest.

More relevant is the bounce itself combined with compressing volatility , which forces dealers to buy into strength and chase the price higher.

Dealer gamma improved by 216MM to -978MM, which again means more liquidity and happy markets.

The main resistance level today will be 4000, support is 3900. I continue to characterize this rally as a technical move, largely driven by gamma mechanics. Check out my Twitter to see a gross gamma chart, that underscores the huge importance of 4000 in terms of options. Most calls and puts are concentrated at this level.


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