Daily Brief For December 22, 2022

Daily commentary for U.S. broad market indices.

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Graphic updated 5:30 AM ET. Sentiment Neutral if expected /ES open is inside of the prior day’s range. /ES levels are derived from the profile graphic at the bottom of this letter. Levels may have changed since initially quoted; click here for the latest levels. SqueezeMetrics Dark Pool Index (DIX) and Gamma (GEX) with the latter calculated based on where the prior day’s reading falls with respect to the MAX and MIN of all occurrences available. A higher DIX is bullish. At the same time, the lower the GEX, the more (expected) volatility. Click to learn the implications of volatility, direction, and moneyness. Breadth reflects a reading of the prior day’s NYSE Advance/Decline indicator. VIX reflects a current reading of the CBOE Volatility Index (INDEX: VIX) from 0-100.


As of 5:30 AM ET, Thursday’s regular session (9:30 AM – 4:00 PM ET), in the S&P 500, is likely to open in the lower part of a balanced overnight inventory, inside of prior-range and -value, suggesting a limited potential for immediate directional opportunity.

Our S&P 500 pivot for today is $3,908.25. 

Key levels to the upside include $3,926.50, $3,943.25, and $3,960.25. 

Key levels to the downside include $3,893.75, $3,879.25, and $3,867.75.

Click here to load today’s key levels into the web-based TradingView platform. All levels are derived using the 65-minute timeframe. New links are produced, daily.

Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures.

Checking Bookmap, a tool that allows us to visualize market liquidity, today, we see orders near the $3,920.00 – $3,925.00 area in the E-mini S&P 500 (FUTURE: /ES). These are orders to enter or exit trades at the resistance area highlighted in the 65-minute profile chart above.

Graphic: Market liquidity in the E-mini S&P 500 Future via thinkorswim’s Bookmap integration.

Considerations: Traders may have noticed responsiveness near key-technical areas visually discernable on a chart. In the Daily Brief for December 21, we discussed the positioning contexts to blame for this. After big events last week, an absence of the unexpected (i.e., what traders sought to hedge and/or bet on) prompted the sale of options protection, a pressure on options prices.

Graphic: Retrieved from SpotGamma.

As a result, the S&P 500 is sliding into lower levels of fixed-strike and top-line implied volatility (IVOL) measures. Given the current positioning, when IVOL is on a downward trajectory, counterparties sell strength and buy weakness. For instance, there is a ton of short-call open interest at the $3,835.00 strike. Customers are (mainly) short these calls. Dealers (on the other side) sell underlying to re-hedge their rising positive Delta exposure from the in-the-money call. This mutes movement.

Graphic: Retrieved from SqueezeMetrics.

This more positive Delta is a consequence of IVOL falling and Gamma (sensitivity to movement) rising. A higher Gamma implies a more variable Delta and, hence, less stable directional risk.

Graphic: Retrieved from SpotGamma.

Basically, as IVOL falls, the extrinsic or time value (theta) of the option falls and, given that in this case, the option is in the money, its intrinsic value (Delta) rises.

Graphic: Retrieved from The Options Industry Council.

While this is happening (i.e., orderly index selling and lower IVOL), big constituents like Tesla Inc (NASDAQ: TSLA) are swinging far more amid traders’ uneasiness and bets, there.

Weakness under the hood, relative to the indexes, and responsiveness to very minute technical levels won’t last; yes, in the interim, you may lean on these levels provided. Again, however, don’t expect that to last.

IVOL is performing poorly and that’s resulted in investors moving to better-performing strategies including short volatility. As a consequence, the broader market is in a less-well-hedged position. Coupled with the removal of the index-level support contexts (i.e., positioning that’s promoting responses to key areas) and some exogenous catalysts, we could see higher realized volatility (RVOL) and less immunity from the weaknesses happening under the hood in single stocks, in the new year.


Volume Areas: Markets will build on areas of high-volume (HVNodes). Should the market trend for long periods of time, it will be identified by low-volume areas (LVNodes). LVNodes denote directional conviction and ought to offer support on any test.

If participants auction and find acceptance in an area of a prior LVNode, then future discovery ought to be volatile and quick as participants look to HVNodes for favorable entry or exit.

MCPOCs: Denote areas where two-sided trade was most prevalent over numerous sessions. Participants will respond to future tests of value as they offer favorable entry and exit.


In short, an economics graduate working in finance and journalism.

Capelj spends most of his time as the founder of Physik Invest through which he invests and publishes daily analyses to subscribers, some of whom represent well-known institutions.

Separately, Capelj is an equity options analyst at SpotGamma and an accredited journalist interviewing global leaders in business, government, and finance.

Past works include conversations with investor Kevin O’Leary, ARK Invest’s Catherine Wood, FTX’s Sam Bankman-Fried, Lithuania’s Minister of Economy and Innovation Aušrinė Armonaitė, former Cisco chairman and CEO John Chambers, and persons at the Clinton Global Initiative.


Direct queries to or Renato Capelj#8625 on Discord.


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Do not construe this newsletter as advice. All content is for informational purposes.

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