SPX futures made a 5:00 am low at 6507.90, then began ramping higher to meet the AM $1.3 trillion options expiration in the SPX.  This may be the largest November options expiration, ever.  Various reasons were given for yesterday’s disaster.  However, one important reason was missing…short gamma.  Thursday’s gap open may have been a play by the dealers to rise out of short gamma beneath 6700.000.  Having hit the right shoulder resistance of the Head & Shoulders formation at 6770.35, selling began again in earnest, declining 232 points at the close.  Unless dealers can rise to Max Pain (least option payout) at 6650.00 at today’s open, dealer options pain (payout) may be enormous.  Dealers have had a cushy ride during the bull market, since 30-40% of all options expire worthless, while 50-60% are closed out prior to expiration, leaving a small payout by the dealers.  This may be changing.  The Cycles Model calls for a possible bounce, followed by a resumption of the decline by mid-morning, with strength,  through the weekend.

Today’s options chain shows Max Pain (least payout) at 6650.00.  Long gamma  begins above 6700.00, while short gamma strengthens beneath 6640.00 with a put wall at 6600.00.

ZeroHedge advises, “10 Things You Shouldn’t Miss This AM…”  (A must read.)
 

VIX futures consolidated beneath yesterday’s high, preparing for the largest momentum spike since April.  A possible target for this move may be the April 7 high.

The November 26 options chain shows short gamma beneath 19.00 while long gamma is now firmly ensconced above 20.00 with significant long holdings as high as 50.00.
 

TNX is pulling back beneath the 53-day Moving Average at 40.83 this morning in a minor Trading Cycle low.  The pullback may be due to a rotation out of stocks into bonds as equities may be shaken again today.  It is not anticipated to last, as trending strength may surge by early next week, sending yields higher..

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