8:15 am
Good Morning! Are you praying for our country?
SPX futures are flat, awaiting the May jobs report. The Cycles Model clearly calls for an end to the current bull market. Dealers have pinned the SPX options market at 5350.00. Whichever way the market turns may be violent.
Today’s options chain shows Max Pain at 5350.00. Long gamma begins above 5360 and strengthens above 5375.00. Short gamma starts at 5325.00.
ZeroHedge reports, “The global stock rally faltered as US equity futures were unchanged for the second day in a row this morning and trading right on top of the “gamma gravity” level of 5350, where as discussed yesterday there is a record $10 billion dealer long gamma pile up which has made the market “stuck” at the strike price.”
8:50 am
SPX futures have made a morning low at 5319.00 thus far, after the Jobs Report claimed 272,000 new jobs in May. This overly rosy report may have been intended to help the incumbency, but they have shot themselves in the foot. This put the nail in the coffin for bullish expectations going forward. Dealers are doing their utmost to keep the SPX out of short gamma.
ZeroHedge comments, “Ahead of the payrolls report, we commented that with both of the two largest banks – Goldman and JPMorgan – expecting a miss, it was only logical to expect a big beat…
… and sure enough moments ago the BLS reported that in May, the US added a whopping 272K jobs…”
VIX futures rose to a morning high of 13.08 before a pullback. There is a lot of stored energy to the upside in the VIX.
The June 12 options expiration shows long gamma may exert a pull toward 16.00, its first large position.
ZeroHedge notes, “Size long gamma
Dealers are running the second biggest long gamma ever. Goldman’s trader Garrett writes: “with ~$9.5 billion of gamma to trade per 100bps; dealers have to sell 35,000 eminis on a 1% rally, and buy 35,000 eminis on a 1% sell off”. 5350 is basically a massive pin strike that will suppress moves around it. Options related risks change with time, so the increase in gamma, isn’t necessarily only driven by recent flow by end customers. One thing is sure, the delta flow from dealers is “real” flow that will be hedged in the market. For the 1 minute explanation on gamma, see here.”
TNX made a moon shot out of its Master Cycle low, as suggested in earlier posts. The Cycles Model suggests Trending Strength may continue into next week.