We are now looking to “play the range” of S&P 500 Index (^SPX) 6,820 resistance and 6,600 support. We think a full vol premium contraction is unlikely this week, and negative gamma still dominates the SPX landscape, observes Brent Kochuba, founder of SpotGamma.
Both of these factors should keep SPX prices unstable (i.e. no pinning), so we anticipate large swings over the next several sessions.
As you can see in our latest SPX GEX, the current SPX prices have the SPX rolling in the trough of negative gamma. That is to say negative gamma starts to decrease to the upside, and it starts to below 6,600. This suggests that negative gamma pressure reduces immediately into 6,900 and below 6,600, which fits with our “large swinging range between 6,600 and 6,820” observation.
Further, despite the large overnight move lower into Thursday, vols were actually flat versus Wednesday night’s close. That is a good sign that selloffs from here, while quite possible, may lack magnitude.
