The SPX closed 0.1 percent lower above today’s pivot at 3900 points, while implied volatility remained in the range of the new normal and closed down 0.8 points at 31.8 percent.
In the late afternoon trade the market recovered most of its losses after comments by San Francisco Fed President Mary Daly, who said that a 75 basis point rate hike is "not a primary consideration".
I consider this a purely technical move, as rate hike expectation futures have never priced in an even modest probability for a 75 basis points move to begin with.
After the close a Powell interview made the rounds, in which he once again confirmed that the Fed is firmly committed to fight inflation, but at the same time he didn’t spread much confidence (“I think we have a lot to learn about what the path ahead looks like”).
The whole thing can be read here, but the opportunity costs of reading the blabber are probably pretty high on this sunny afternoon.
Fundamental data:
The PPI increased 0.5 percent month-over-month as expected following an upwardly revised 1.6 percent (from 1.4%).
The key takeaway from the report is that inflation for producers remains at intolerably high levels and will eventually pressure either margins, demand, or a combination of both.
Gamma situation:
Implied dealer gamma increased slightly to -1199M, while the gamma inversion level remained unchanged at 4340.
I continue to expect erratic market behavior, as the negative gamma readings forces option dealers to constantly re-hedge their portfolios in a cyclical fashion (selling into weakness, buying into strength).
Tomorrow weekly options that represent about nine percent of total gamma are expiring, but this will have only a very minor effect.
In the late afternoon trade the market recovered most of its losses after comments by San Francisco Fed President Mary Daly, who said that a 75 basis point rate hike is "not a primary consideration".
I consider this a purely technical move, as rate hike expectation futures have never priced in an even modest probability for a 75 basis points move to begin with.
After the close a Powell interview made the rounds, in which he once again confirmed that the Fed is firmly committed to fight inflation, but at the same time he didn’t spread much confidence (“I think we have a lot to learn about what the path ahead looks like”).
The whole thing can be read here, but the opportunity costs of reading the blabber are probably pretty high on this sunny afternoon.
Fundamental data:
The PPI increased 0.5 percent month-over-month as expected following an upwardly revised 1.6 percent (from 1.4%).
The key takeaway from the report is that inflation for producers remains at intolerably high levels and will eventually pressure either margins, demand, or a combination of both.
Gamma situation:
Implied dealer gamma increased slightly to -1199M, while the gamma inversion level remained unchanged at 4340.
I continue to expect erratic market behavior, as the negative gamma readings forces option dealers to constantly re-hedge their portfolios in a cyclical fashion (selling into weakness, buying into strength).
Tomorrow weekly options that represent about nine percent of total gamma are expiring, but this will have only a very minor effect.