Gamma Jumps and Market Extremes

US equity markets are exhibiting unprecedented technical extremes in gamma, dispersion, and correlation, driven by fevered speculation in semiconductor stocks and 0DTE options. This setup closely mirrors the pre-bear market conditions of late 2021.

Key Takeaways

• 1.S&P 500 gamma has risen at a record pace from deeply negative to near record highs in a matter of weeks.
• 2.The gap between realized dispersion and index correlation is at an unprecedented high, driven by concentrated speculation in semiconductor stocks.
• 3.The current market technical setup mirrors November 2021, which preceded the 2022 bear market, suggesting a market top may be 1-2 months away.

Table of Contents

• Rise in Gamma Has Never Been as Extreme
• Gap Between Dispersion & Correlation Has Never Been Larger
• All The Action Is Taking Place in Single Stocks
• Very High Gamma Keeps Correlation Low
• Drop in Intraday Vol Consistent With 0DTE Selling
• It Doesn't Look an Auspicious Time for the S&P

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