$SPY

OI-based Net Gamma Exposure: negative
Volume-based Net Gamma Exposure: clearly negative
Directionalized Volume: negative
This combination means a negative gamma regime. In a negative gamma regime, Market Makers are forced to trade in the direction of the price move. If the market falls, dealers SELL to hedge and accelerate the drop. If the market rises, dealers BUY to hedge, creating a squeeze.
There is a massive pile-up at the 680 strike level. We are currently at 681.06, meaning we are right on top of this big wall. The heavy open interest at this level acts like a magnet that pulls price. The market may not want to break it. If the 680 level breaks down with volume, the purple bars below get triggered and the gamma squeeze works in reverse, and a waterfall sell off toward $674 can begin.
On the right side of the chart, there is no meaningful call wall up to the $700 level. The bars are very weak.
This shows the market does not intend to go up. Investors are not positioned for upside. However, if a rally starts with unexpected news, since there is no resistance above (no call wall for dealers to suppress), the move can evolve into a very fast V reversal. But right now, the center of gravity is completely down.
In summary: Dealers are currently positioned in a way that can accelerate the drop. Volatility will stay high. In closes below 680, selling gets aggressive. This chart is not a calm, trending market, it is a choppy and aggressive market chart.
Even if positive net delta is seen in the last hour, 0DTE negative delta is still strong. This says that even if there is mechanical short covering or a gamma driven bounce into the close, it is not a regime changing risk on.
This excerpt is a very small part of my analysis and it explains what’s happening, meaning the current situation. So what could happen going forward? I talked about it in the rest of my analysis 💯