This chart is intended for other idea articles but I thought it was interesting enough for its own idea.
I'm not allowed to post my website, but you can find it in my profile it contains the data I used for charting this.
1) Naive Gex - Is the total option chain of a stock across all expirations. In other words the gamma exposure assumes customer is always long call short put meaning the dealer is short call and long put. Not very helpful, but it gives you the idea of the total value of options out there. It is based on CBOE delayed data.
2) 21DMA of dealer directional open interest (DDOI) gamma exposure across all option chains of the S&P 500.
This data is mapped from my website into Trading View. There is no way I found to get options pricing data for all of option chains, so tracing is the only way I can get this data into trading view.
What you can take from this data is simple.
It is a measure of liquidity in the entire S&P options data.
I labeled what type of liquidity regime we are in.
To those who are predicting a crash during positive liquidity environments.
Don't get caught to short. If you manage a portfolio properly then I doubt you will need to worry about a market crash.
I see 2 scenarios of a market crash happening at the bottom in stocks and bonds.
1) It's short lived (~15-20%) and corrected via interest rate decreases and changes to SLR / ON Reverse Repo. Long enough to see who has been swimming naked, but not break Central banks. 2) a crash so big it collapses central banks and US has not choice but to change to CBDC (the "great reset" scenario)
If you manage a portfolio properly, you wouldn't listen to any advice I have for doing so anyway. and you are prepared for the scenario 1.
if scenario 2 happens it will break society and USD and everybody finds out they only own fugazzi (nothing). Realestate, hard assets like gold, silver, food, water. oil will sky rocket.
Throughout all the selling last week the entire S&P did not go negative gamma. This is positive market conditions.
Next week is considered a very large window of weakness in options event volatility and expiration.
I expect volatility next week and we won't know the true outcome until after OPEX.
Have you ever heard the phrase don't fight the fed.
Well in this case, don't fight the fed liquidity.
I think we're at that critical juncture the next 3 months and I will be the first waving red flags.
A slight flinch in PPI not meeting expectations was just repositioning for CPI miss and FOMC 75bps hike.
To be clear on my position.
1) I think PPI is a bad measure to inflation. so many factors. I only track for event vol and how dealers position around events. 2) CPI will likely be same as PPI. Lower but beat expectations. 3) FOMC - no rate hike. Hold for more data. Price stability...
I believe Elon Musk. He Believes Cathy Woods
My instinct tells me that ARKK is at its tipping point now and more losses on stocks like TSLA will cause liquidity issues.
The amount of selling after Archegos would pale in comparison the financial storm of a larger hedge fund going under.
And I could be completely wrong.
It is easy to call a trend change while in the trend. It is incredible difficult to build economic models that identify when a trend will change or when a market will crash. But I'm trying.
So before you come clown bashing my work, at least provide some of your own information or data to backup your claims.
I have used these models of liquidity measurement to predict precisely when trends will change.
over and over
and over
and over again.
TLDR; Dealer Directional Gamma Exposure is trending positive. Lower CPI + Fed Rate Pause will increase liquidity. Increased Liquidity will lower volatility through Christmas for a Christmas rally. If no pause and higher CPI then I will buy OTM puts and go out for pizza
This trend needs to break because lower lows for this expiry or next (quad witching) will likely cause a liquidity crisis. A Taper Tantrum. The Big One.
Final Thoughts. I am an Optimist, a Protagonist, an Innovator, Engineer, Artist, but far from ever joking around except to turn a frown upside down. Thanks to all who support my ideas.
If the white rabbit is what you seek. The trendsetter xyz is the key.
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Intraday update. Crude chart but you can see even with TSLA selling off today and VIX blasting off there is still the slow grind higher.
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Key to remember what I said about the direction not being known until after Quad Witching. Until then, assume more playing chicken with the 20D moving average.
Hello thanks for the analysis. So to clarify what you said, do you expect spy to go up after cpi release?
SPYvsGME
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@janatztxx, You're welcome. Slow melt up into March 2023. I'm expecting by the end of the week to test the 200D again (reasons in a followup chart soon). The Feds mandate is max employment, stable prices, moderate long term interest rate. Below 3950 will be unstable prices and risk price stability issues below 3500. The market is a very large factor in US GDP. Another year of slow GDP or the idea of negative growth for 2023 will be the last nail in the coffin for the 2nd leg down.
SpyMasterTrades
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Thank you for all the effort you put into your posts. There's so much to learn from them, even for experienced traders!
SPYvsGME
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@spy_master, Thanks SM. Always welcome your feedback and bias.
day0
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very interesting. I'm predicting a S&P dip for Q1 2023; which could easily continue for most or all of 2023.
McG16
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Always a good read. As always, thanks for sharing your wealth of information in the rabbit holes of market making.
SPYvsGME
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@McG16, I'm glad you caught the reference. That movie explains perfectly how markets were in the past and was thrust into the future to catch up. Imagine now with technology like ChatGPT and the age of learning ai will change the face of markets forever.
Steversteves
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Jeeze, I have read your ideas but I feel like, for whatever reason, the lightbulb just went off now. You and I have very similar goals and endeavours. You and I are going about it contextually differently but holistically the same. Your data may just be what my models need. And mine, yours.
Feel free to reach out to me if you ever want to collab.
Safe trades man!
SPYvsGME
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@Steversteves, Thanks. Next week I'm planning on covering options and volatility. I'll go through your content and get back to you with ideas.
Steversteves
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@SPYvsGME, Thanks! And its unnecessary really, all I am doing is using historical data and key events (like FOMC meetings) to map out trajectories and price action statistically. I have looked into option chain activity and added it into my models, but I couldn't find enough of a statistical correlation between that and PA and trends so abandoned that. I also looked at VIX, but again, as far as the software I use was concerned, no correlations or predictive value was found. I see you look at very unique things that I have never considered or I don't even know where to find that data, but I wonder, if I add that, if it would be the tipping point I would need to tip the scale to finally be able to plot more precise trajectory changes etc. Anyway, feel free to take a look and reach out to me if you ever want to discuss more details :-). Take care!