Gamma Bands
The S&P 500 (SPX) closed 86 points higher on the week, having found support at the gamma neutral level. The Gamma Band model rose to a 100% allocation. With monthly option expiration this Friday January 19th, there will be supportive re-hedging flows as long as the market remains above the gamma flip level.
The market will reduce exposure if price falls below the gamma flip level, which is currently near 4,728. This model will fall to a 0% allocation if SPX closes below the lower gamma level currently near 4,444.
The chart below shows how price (in black) relates to the gamma flip (in blue) and the lower gamma level (in red). The gamma flip level often serves as a support and resistance level.
The Gamma Band model can be viewed as a trend following model that shows the effectiveness of tracking various levels of market gamma. When the daily price closes below Gamma Flip, the model will reduce exposure to avoid price volatility and sell-off risk. There is also an allocation adjustment on the trend slope of the gamma flip line.
Market Navigator Signals
Our Market Navigator Report encapsulates data from the broader market and the economy to provide a near-term outlook for stocks. Fundamentally, the market remains cautious due to credit concerns and the inverted yield curve. From a technical perspective, the overnight signal has moved from a leveraged long position to 50% exposure. The other technical signals remain bullish.
Please visit our website for more information or to download sample reports.
Disclaimer
This is for informational purposes only and is not trading advice. The information contained in this article is subject to our full disclaimer on our website.
Authors
Erik Lytikainen, the founder of Viking Analytics, has over twenty-five years of experience as a financial analyst, entrepreneur, business developer and commodity trader. Erik holds an MBA from the University of Maryland and a BS in Mechanical Engineering from Virginia Tech.
Rob McBride has 15+ years of experience in the systematic investment space and is a former Managing Director at a multi-billion dollar hedge fund. Rob has deep experience with market data, software and model building in financial markets. Rob has a M.S. in Computer Science from the South Dakota School of Mines and Technology.
Erik Lytikainen, the founder of Viking Analytics, has over twenty five years of experience as a financial analyst, entrepreneur business developer and commodity trader. Erik holds an MBA from the University of Maryland and a BS in Mechanical Engineering from Virginia Tech. You can learn more about his work on his website: www.viking-analytics.com.