Mid-Week Market Recap
🎯 Key Takeaways
- Bearish Trend Continues: 3 closes below Friday's Point of Control
- Gamma Exhaustion: We've hit the -1.5 SD level, defusing major gamma risk
- Friday Outlook: Bearish bias with high conviction strength
🔍 What Just Happened?
We touched the critical -1.5 SD level today, which signals institutional hedging activities are satisfied.
đź”® Friday's Setup
The early week bearish action typically dictates Friday's direction—and we've been trading BELOW the weekly PoC, reinforcing this bearish bias. Our indicators show high conviction on the strength of this move.
⚡ Power Hour Opportunity
With gamma risk defused, watch for a potential gamma event during Friday's power hour (final trading hour) IF we remain within the ±1SD range—institutional hedges will need to come off, potentially creating volatility.
đź“Š Standard Deviation Journey
Monday: Close outside lower weekly expected move
Tuesday 1.5SD: Close outside lower weekly expected move
Wednesday: Close outside lower weekly expected move
đź“Š Mar Friday Trend Predictions
1 out of 1 correct (100%)
Check out the Simple Sheet Results every week to see how this basic analysis seems to get it right week in - week out.
Follow us on Twitter for live intraday commentary and always reach out if you have any questions.
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 - 1.5 SD level on an intraday basis. What does this mean? Funds sell SPX options at the +/-1SD level, when this is breached, they must hedge by trading ES contracts in the direction of trade. Once we touch the 1.5 SD level, they are sufficiently hedged.
Gamma Risk
Gamma risk has been defused and there is minimal gamma risk towards the end of the week because funds are sufficiently hedged. This opens up a gamma event for power hour (last trading hour of the day) on Friday IF we are trading inside the +/-1SD range, as the hedges need to come off.
Expected Friday Trade
Bearish. Friday trends are usually set by early week trade and are hard to reverse.
Friday's Potential
The simple sheet is giving us high conviction into the strength of the move for Friday. We expect to close at least 10 handles outside the expected move and also more than 25 handles lower from Wednesday's close.
đź“– 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