Major support lies at 4400 and 4345. Major resistance stands at 4430, 4450, and 4500. Other key levels today:
Today is monthly and weekly options expiration. There are better days to day trade than today. But if you must, be aware that the market is in high volatility mode. VIX term structure inverted again yesterday.
With yesterday’s activity, gamma has moved down to 4400, with roughly 25% of SPY and QQQ gamma or nearly $2 trillion expiring today. 4400 should now act as a magnet.
Most positions expiring today are puts, which is normally short-term bullish. In the intermediate-term, however, expiration is reducing some hedge protection. Monday’s holiday (President’s Day) throws some additional uncertainty into the mix.
As is typical when the VIX is this high, liquidity is low which induces even more volatility.
Geopolitical events will amplify risk in this high implied volatility and negative gamma environment. Any short-term bounce today on good news coming out of Ukraine likely would be temporary. Interest rate policy is more of a driver of price movement and won’t be resolved until the next Fed meeting in March.
Yesterday’s regular session low at 4367.50 is poor and in need of repair. The overnight session breach does not count towards repair so the market reaches back up to 4367.50 to repair the poor low, it can be an initiating short trade. If the opportunity presents, target the overnight low from February 13th at 4354 and monitor for continuation.
I would use the overnight high at 4414 as the line in the sand today to change the tone from bearish to more neutral. Prices remaining below that level keep sellers in control.
Review last night’s commentary for the big picture. The S&P 500 and NASDAQ 100 are on the verge of breaking their triangles to the downside.