A choppy overnight session saw S&P futures test back up towards the key 4,400 level, which as SpotGamma notes is the major gamma strike on the board.
SpotGamma also notes that ‘The Call Wall’ has consolidated to the 4450 strike which is now the top end of our range on a larger time frame, with 4375 as intermediate support.
As the chart above also shows, the inflection point at 4330 below which we still hold as a downside pivot point. That would be the target for our first “stage” on a move lower.
Nomura’s Charlie McElligott agrees that the 4400 level in SPX continues to just act as an incredible anchor into the weak August historical seasonality and essentially “peak” Dealer (long) Gamma
However, McElligott warns, dealer desks around the Street just keep getting ripped on medium- and longer-dated downside (tape at all time highs with pending Fed Taper coming down the pipe, LOL), as evidenced by 2m downside Put Skew @ 97%ile, 3m 97%ile, 6m Put Skew 99%ile…
…so we keep worried about being short tails (-3% move) and will see any “real” move to downside get spazzy quick (Gamma “flip” level @ 4270).
SPX 4400 upside resistance, 4375 intermediate support, 4330 downside target (and then its gets hairy)… Trade accordingly.
