Morning Update

Good Morning! Yesterday we closed below our (Open Interest) Put Wall on both SPY and QQQ, and that has not happened since I can’t even tell you when.  We also have gamma squeezes on most of the major tech names, so I am expecting a bit of a relief rally as we’re seeing in the premarket.  However, I don’t know how far Up we can move on the indexes as Vanna is neutral in the 3990/4000 range on SPX and 298 or below on QQQ.  So anything to the upside is going to trigger Broker Balancing.

On SPY we have a lot of puts across the 420 and below; but calls have started to move down the option chain.  But on SPY we have a lot of puts on 400 and 4000 on SPX, so I don’t think we can move substantially below that point unless we have a serious change in positioning. We are beginning to build up an Open Interest ledge at 3901 but as long as 4000 remains so large we’ll find it difficult to drop below and stay below.

We have seen what is considered an earnings recession where we’re guiding down across the board for substantive reasons relating to supply chain and the like, so though we might not get a full blown economic recession we are seeing an earnings recession.

Through last week’s earnings, some companies tried to gloss over the impact of China’s economic situation on their forward guidance, but Shanghai’s extension to the lock down had revealed that some of the illusion has already been pulled back.

Morning Update – May 10th, 2022

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