It Ain't Over Yet $SPXUntil the 2900 volatility trigger kicks in there is amplified risk to downside. 2900 is where options dealers flip from short gamma to long ie from "volatility fueling" to "volatility dampening". That's not a bearish call - simply means that risks of a 1-2% down move in very short order is still there. Market needs a real catalyst to move higher, other over 2900 itll probably just be a grind.
Gamma
A Tweet is All It Takes: Short Gamma Update $SPXDealers are still short gamma until the market is over 2900. Based on last several days this indicates 2900 could be a decent topping target. Large Put open interest at 2850 may provide support. Because dealers are short gamma then will fuel the market higher or lower when the direction gets set. In summary: volatility is likely to continue unless markets push through 2900.
Downside risk outweights upsideNo idea which direction comes after the Fed today but based on the options market it appears that any negative news will be met with strong selling by options dealers and could make a large move down possible. Good news could see a decent rally, but there is resistance forming at 2950 and larger resistance at 3000. In other words it appears that a chance of a move down of >1% outweighs the odds of a move up over >1%.
Markets Cant Move Above Volatility TriggerMarkets had to hold 2920 to break the volatility cycle from last week. Under that level market makers will amplify and selloff. The fact that the market buyers couldnt overcome just a bit of dealer selling isn't great. FOMC minutes Wednesday and Jackson Hold starting Friday.