Good Morning!

Yesterday afternoon we sent an email update warning you that all the indicators we watch were turning up bearish. Overall flow, gamma positioning, and sentiment were all indicating a bearish move. As I type this premarket we are down about 0.5% and could be slipping off into some negative gamma territory. We will spend some time on that in a bit.

Let’s dive into our “Whale Watching” segment and see what Wall Street whales bought Yesterday.

This alert came via a “Grenade Trade” indicator. This indicator appears when whales are placing large and repeated sweep orders on single leg short term contracts. This one came in during the last hour of the day yesterday and was pretty sizeable. It also fits into the general trend that our additional indicators view the market through as bearish.

This one is for your longer term investors. Whales triggered the “sizable sweep” by repeatedly buying the same contracts in unusual volume with size. Someone is taking advantage of the recent META selloff to build up a nice position for a year and a half down the road. These LEAP contracts will likely age really well for this investor.

Let’s do a quick refresher for those of you who don’t know. This is the Gamma Heatmap for SPY. This is how it looks at 9:15 AM EST premarket. The green nodes are called positive gamma and they act as a stabilizer. When green appears above current price, think of it as a resistance. When Green appears below current price think of it as support. Red nodes are known as negative gamma. Think of these as accelerants. These pockets are going to move the market in the direction it’s already going except they will amplify the move.

In our current setup, SPY has moved back down into negative gamma territory after spending the entire day in the green yesterday. We have 2 potential ways this can play out (obviously lol). We have heavy resistance at 660 and over. If markets do turn from their premarket sell off do not look for them to move through 660 and over smoothly. That’s the top Id put on the day. However, with the accelerants below the markets could take a trip down today. That’s what I will be watching most for.

Macro events are in the favor of bears today. There seems to be a lot going on in the world and markets are not likely the unsteadiness of it all.

I am looking to trade in 2 potential ways today. I’ll buy puts at open if we flush upon open. The negative gamma could push us down a strike or two pretty quickly and that can lead to a good and quick return. If that doesn’t play out I’d love to buy puts into testing the 660 resistance overhead. Those are the 2 potential entries for me today.

That being said, these markets are dynamic. A tweet or news event can completely shift the sentiment and setups. I’ll be watching for gamma positioning all day as this usually sets the stage for what the market is about to do. Seeing where volume is building up is the closest thing to a crystal ball in the markets I’ve ever seen.

I’ll report back with what I see.

Happy Trading!

-Caleb