Morning Update

Good Morning Friends,

Yesterday we had a huge gap down and then we gave it all back (and now we’ve given back all the gains from the drop again in the overnight).  So I know a lot of you might be asking, what in the world is this NONSENSE!

I personally believe that the mistake leak that CPI would be 10% (which was actually the CPI for Spain not the US) caused a LOT of put buying and selling into the close on Tuesday. There were massive dark pool puts on SPX, at the 3760 and 3750 and 3740. When SPX opened down yesterday at those OTM long puts they were closed less than 30 mins into the open, eradicating the gamma pull down (when you have a significant Open Interest there is a lot of Gamma there, and when those Options are all closed rapidly, that nullifies the gamma that was pulling down the price).

Also, while QQQ and NDX were also retracing yesterday if you were watching the Time and Sales on ToS you would have seen that there were almost NO real money flows, volume yesterday was extremely week when considering the overall extend of the retrace.

Now today we have more news, and tomorrow we have Options Expiration, which can easily cause this “floating to the resistance” retracements on low volume. Please be ready, because next week we move into Vix Expirations AND we might get leaks about the coming rate hike and quantitative tightening.

Remember we will NOT have an FOMC in September, BUT the Fed could front run the move and suggest that .50 or .75 or even 1.% for Sept are ON the table.  

Remember, that at the moment the number of options contracts being positioned in relationship to actual shares being accumulated is very slanted (a lot more options positioning and a lot less stock accumulation) and this creates a LOT of gamma at those big Open Interest strikes and drives price between those major ledges. So please mark those on your chart for the underlyings you are trading, just look at the option chain and find those major OI strikes, so that you don’t get caught out with price making huge runs to a higher or lower Open Interest ledge.

Morning Update – July 14th, 2022

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