Just like late February when we had the firstinflation scare-cum-Treasury tantrum,Tech is breaking down, and look no further than Amazon for the evidence.
In just the three days since reporting blowout Q1 earnings which sent its stock to a new all time high, AMZN stock is down over 9% and is on the verge of a correction. Other FAAMGs, most notably Apple which had a just as impressive quarter, are not faring any better.
However, unlike late February when tech was monkeyhammered mostly as a result of sharply surging yields, this time there is the double whammy of deeply negative gamma.
AsSpotGamma wrote overnight, "both SPY & QQQ remain in negative gamma territory which implies higher relative volatility."
Nomura's resident x-asset expert, Chalie McElligott, picks on this and in a note this morning writes that while "there is nothing exceedingly bulky or “whale-like” by itself", there has"been a pick-up with broad Vol / Gamma selling from clients in recent weeks."The details:
- This has show via standard overwriter flows in singles and index, but also to the systematic strangle-selling mentioned in the press last week (which looks like the odd-lottish flows in ratios that trade ~3-4x’s a week, while there too is a separate daily overwriter program in one month straddles for example)…all of which has contributed to what has been a very “long gamma” dynamic for Dealers—and thus the “stuck” S&P for about three weeks, pinging around the gravity of the big strikes at 4150-4200
- The %ile rank of the overall $Gamma magnitude across US Equities index has come-off after recent expirations (SPX / SPY consolidated now a middling 56.6%ile $Gamma / IWM 35.9%ile; EEM 37.4%ile); however,Nasdaq / QQQ’s continue to be the epicenter for how broad index movement could get weird, with -$435.8mm $Gamma which is extremely negative at just 3.8%ile
