Despite some wiggles and shakes, SPX may disappoint this week

2023年6月26日

Primary Chart: SPX chart on a daily time frame with a key options-OI level (relating to JPM's quarterly collar) as well as a couple crucial VWAPs to monitor for this week. Support and resistance for the week are shown in blue horizontal lines.

SPX may trade within a modest range this week unless spooked by aggressive Fed officials' commentary, or encouraged by Fed officials watering down their hawkish views from the FOMC statement and SEP dot plot given on June 14, 2023.

Since the mid-June 2023 high in SPX, price has largely trended modestly lower into the 4300s again. It has remained below the anchored VWAP from this mid-June peak. This is a helpful level to watch for resistance for not only this week (which this post addresses) but also next week and into July.

For now, support lies directly at the large options level of 4320 (which has significant call gamma) which is JPM's short-call strike of its quarterly collar. That collar will be rolled on Friday according to options and vol experts who carefully track this information.

The weekly expected move from a leading brokerage is given at 57 points approximately. This equates to a range of 4291 to about 4405. The 16-delta calculation for the weekly expected move is a little wider, showing an expected move range of $4278–$4410. One other calculation using IV for the June 30 expiration is somewhat wider than the other two ranges at 4260-4428.

Even the volume profile seems to coincide with the expected-move range.
Supplementary Chart A:

Why use these expected move figures this week? They're not perfect, but neither is TA, and sometimes they may help especially at a time when options hedging flows may dominate the action—unless the Fed really does something inconsistent (which could push prices a bit farther than expected) or the Prigozhin / Putin saga isn't as resolved as it appears (completely unknown). This is no different from any other week where unknown black-swans often lurk, especially on social media, but almost never materialize.

So directional traders may be largely disappointed if price remains neutral. However, directional traders with efficiency and nimble precision may find opportunities at the edges of intraday or weekly ranges provided they can be patient for the setups with confirmation and risk management. This is not a recommendation to do so, however, as rangebound markets sometimes are best left alone. Remember the famous trading line about a time to go long, a time to go short, and a time to go fishing (or some other diversion). In any event, the best hope for an edge in trading such markets short term is to trade from the edge (major support and resistance for any range) once price stalls and appears to confirm a reversal. In short, though, the money makers will be the premium sellers in all likelihood for this week.

2023年6月26日

ノート

SPX closed down 19.48 points today, a little less than half a percentage point (-.45%). It came within about 8-9 points of reaching the JPM short-collar strike described above.

2023年7月1日

ノート

The JPM short-collar strike was support for the week. The expected-move range outlined above held strong for 4/5 days this week through Thursday's close. Friday's price action popped through the upper end of the range as shorts got squeezed on a gap higher based on a slightly weaker than expected PCE inflation print.

When looking at the different expected move calculations provided above, price closed only about 23 points above the upper end of the wider version of this range (4260-4428).
"The weekly expected move from a leading brokerage is given at 57 points approximately. This equates to a range of 4291 to about 4405. The 16-delta calculation for the weekly expected move is a little wider, showing an expected move range of $4278–$4410. One other calculation using IV for the June 30 expiration is somewhat wider than the other two ranges at 4260-4428"