SPX EOD Gamma Update
Tadaaa! Markets are more or less back in positive gamma land, what a ride. From a gamma perspective the markets behaved text book style: Fast dips and explosive counter rallies, that's what it is all about when dealers are forced to trade "with the flow".
What happened? Markets where whipsawing back and forth at the 4650 strike, when Powell hit the mic and unleashed a salvo of generic comments, that were in my eyes (except one) rather not bullish (please correct me on that if I am wrong), but sparked nevertheless an explosive rebound that was fueled by option dealers aggressively hedging their short put exposure by buying into the rally.
Main beneficiary was the growth complex, that closed one percent higher, whereas value only gained 0,7 percent. Now this is an important point in my opinion: Nothing changed fundamentally, there were no new signals and I think most of the buying was pure option mechanics: Algos picked up the "low yield" comment from Powell (see chart), VIX got crushed, dealers were forced to buy back futures, voila.
Will the markets move higher from here? It all depends on tomorrows CPI and also the fine print. Anything below 7% year over year could potentially spark some buying, but I doubt that investors will pile into the ARRK spectrum full force again. I want to point out though, that the def fund future markets are coming down as we speak, signaling a less aggressive Fed. More on that in a separate chart maybe.
The bond kings webcast was highly entertaining as usual. Gundlach sees the Fed hiking into a slowdown and committing a policy error and he mentioned the Unmich consumer sentiment that is indeed in free fall mode (something I was mentioning a while back too).
Last but not least: Retail traders were aggressively buying the dip over the last days according to JPMorgan and I also addressed this before: How many of those traders have actually experienced a high inflation environment and a Fed trying to get in front of the curve again? Hm..
What happened? Markets where whipsawing back and forth at the 4650 strike, when Powell hit the mic and unleashed a salvo of generic comments, that were in my eyes (except one) rather not bullish (please correct me on that if I am wrong), but sparked nevertheless an explosive rebound that was fueled by option dealers aggressively hedging their short put exposure by buying into the rally.
Main beneficiary was the growth complex, that closed one percent higher, whereas value only gained 0,7 percent. Now this is an important point in my opinion: Nothing changed fundamentally, there were no new signals and I think most of the buying was pure option mechanics: Algos picked up the "low yield" comment from Powell (see chart), VIX got crushed, dealers were forced to buy back futures, voila.
Will the markets move higher from here? It all depends on tomorrows CPI and also the fine print. Anything below 7% year over year could potentially spark some buying, but I doubt that investors will pile into the ARRK spectrum full force again. I want to point out though, that the def fund future markets are coming down as we speak, signaling a less aggressive Fed. More on that in a separate chart maybe.
The bond kings webcast was highly entertaining as usual. Gundlach sees the Fed hiking into a slowdown and committing a policy error and he mentioned the Unmich consumer sentiment that is indeed in free fall mode (something I was mentioning a while back too).
Last but not least: Retail traders were aggressively buying the dip over the last days according to JPMorgan and I also addressed this before: How many of those traders have actually experienced a high inflation environment and a Fed trying to get in front of the curve again? Hm..
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