SPX Gamma AM
Good morning.
Asian indices began the week on a mixed note. In China large tech companies are cutting staff as the South China Morning Post reported. The country’s exchange in Shanghai closed almost unchanged, while in Hong Kong the Hang Seng declined 1.2 percent and over in Japan the Nikkei gained 1.0 percent.
In Germany the important Ifo Business Climate Index improved by 1.1 to 93 points, while the current assessment for May moved higher to 99,5 points from 97.2, while the expectations component was largely stable at 86.9 points (86.8 previously).
The Euro Stoxx currently is up 0.5 percent, while the S&P 500 future in the US is up 0.2 percent.
Gamma picture:
Dealer gamma registers at -819MM this morning (+149MM d/d).
While the general sentiment is turning more bullish at the beginning of this new week, the market remains fragile and 4000 remains the main (& last) resistance. Should the market be able to clear that level then 4100 becomes a target quickly as it then has left all the main strikes with negative gamma behind.
In order to get a pop higher we need volatility to come down further though, as this would reduce the value of put options and force dealers to buy back more shares. The problem for this scenario to occur is that implied volatility is already “too cheap” relative to long-term correlations as we have pointed out multiple times before.
Stay cautious.
Asian indices began the week on a mixed note. In China large tech companies are cutting staff as the South China Morning Post reported. The country’s exchange in Shanghai closed almost unchanged, while in Hong Kong the Hang Seng declined 1.2 percent and over in Japan the Nikkei gained 1.0 percent.
In Germany the important Ifo Business Climate Index improved by 1.1 to 93 points, while the current assessment for May moved higher to 99,5 points from 97.2, while the expectations component was largely stable at 86.9 points (86.8 previously).
The Euro Stoxx currently is up 0.5 percent, while the S&P 500 future in the US is up 0.2 percent.
Gamma picture:
Dealer gamma registers at -819MM this morning (+149MM d/d).
While the general sentiment is turning more bullish at the beginning of this new week, the market remains fragile and 4000 remains the main (& last) resistance. Should the market be able to clear that level then 4100 becomes a target quickly as it then has left all the main strikes with negative gamma behind.
In order to get a pop higher we need volatility to come down further though, as this would reduce the value of put options and force dealers to buy back more shares. The problem for this scenario to occur is that implied volatility is already “too cheap” relative to long-term correlations as we have pointed out multiple times before.
Stay cautious.
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