No idea which direction comes after the Fed today but based on the options market it appears that any negative news will be met with strong selling by options dealers and could make a large move down possible. Good news could see a decent rally, but there is resistance forming at 2950 and larger resistance at 3000. In other words it appears that a chance of a move down of >1% outweighs the odds of a move up over >1%.
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that played out to the extreme of what we anticipated. Closing data posted below. One tweet and some short gamma and the markets dived. Once again the 2920 volatility trigger proves the level to watch. News reading algos sold off the first bit on the trump tweet then short gamma took over. With dealers solidly short gamma Monday promises to be another volatile session.
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The model thought risk to downside was much larger than upside and a "tweet was all it took". Welcome to short gamma.
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