Mid-Week Market Recap
🎯 Key Takeaways
- Bullish Trend Continues: 3 closes above Friday's Point of Control
- Gamma Risk: We have touched the +1SD level. If we breach it by 20 handles AND strong volume, expect gamma risk to be triggered to the +1.5SD level
- Friday Simple Sheet Prediction: Bullish bias with low conviction strength
🔍 What Just Happened?
We have touched the critical +1SD level this week, but have not yet reached the +1.5SD level. This puts us in a position where gamma risk could be triggered if we breach this level by 20 handles with strong volume, which would initiate institutional hedging activities.
🔮 Friday's Setup
The early week bullish action typically dictates Friday's direction—and we've been trading ABOVE the weekly PoC, reinforcing this bullish bias. Our indicators show low conviction on the strength of this move.
⚡ Power Hour Opportunity
If we don't hit the 1.5SD level on Thursday and reach it on Friday, expect the market to close back within the 1SD range. This reversion can happen at any point during the day. If we remain near the 1.5SD level by power hour, there's a lower probability of an explosive move down, suggesting the market has accepted this price level.
📊 Standard Deviation Journey
Monday: Edge of upper weekly expected move
Tuesday: Close outside upper weekly expected move
📊 Mar Friday Trend Predictions
2 out of 3 correct (66.7%)
Check out the Simple Sheet Results every week to see how this basic analysis seems to get it right week in - week out.
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This newsletter contains automatically generated content based on market conditions and predetermined parameters. Due to the algorithmic nature of our analysis, some content may resemble other publications when similar market patterns occur.
🧠 Deeper Dive
Where is Gamma
We have touched the +1SD level but have not yet reached the +1.5SD level. Funds sell SPX options at the +/-1SD level, and when this is breached by 20 handles with strong volume, they must hedge by trading ES contracts in the direction of trade. Since we've touched the 1SD level but haven't yet triggered a gamma event, we're monitoring for potential directional pressure.
Gamma Risk
Gamma risk potential exists for Thursday and Friday as we've touched the +1SD level. If we breach this level by 20 handles with strong volume, it would trigger institutional hedging activities that could push prices toward the +1.5SD level. Monitor price action and volume closely for signs of this gamma event developing.
Expected Friday Trade
Bullish. Friday trends are usually set by early week trade and are hard to reverse.
Friday's Potential
The simple sheet is giving us low conviction into the strength of the move for Friday. We expect to close 15 handles around today's close.
📖 Understanding our Terms
Gamma Squeeze: Market movement amplified when dealers must buy/sell to hedge options positions as prices move, creating a feedback loop
Short Hedges: Positions taken to offset potential losses in existing portfolios
Gamma Risk: Exposure to accelerated price movements due to options hedging activity
Point of Control (PoC): The SPX close for Friday the week prior; serves as a reference point for the current week's trading
Confluence is King: A trading signal triggered when the weekly expected move coincides with the daily expected move for the next day