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This morning’s report ran late because of a data issue that took me a few hours to resolve. Positive gamma is back, and it came back fast. The S&P 500 closed last week at 7,535, up roughly 2.5% from last week’s 7,354. It reclaimed the flip line on Monday, the 29th, and has closed above it every day since.
Last week I gave you two paths. A hot payroll number breaks 7,197, and 7,040 comes next. A soft number hands the short crowd a reason to cover and squeezes the tape back toward 7,450. The squeeze won, and it did not stop at 7,450. It ran through the flip line, held, and never looked back. This is why this level is so important to watch.
ASSET PERFORMANCE
Emerging markets lead at +24.27% year to date and the Russell 2000 at +21.65%, both more than double the S&P’s 10.18% and well ahead of the Nasdaq’s 12.46%. That spread is the same dispersion trade the correlation chart flagged, index returns carried by breadth rather than a narrow handful of names. Bitcoin is still the worst major at -27.06%, though it opened July up 9.00%, and gold is the only other major in the red at -3.53%.
IMPLIED CORRELATION: THE DISPERSION SIGNAL
When correlation falls this hard while the index climbs, money is separating winners from losers again, not dumping everything at once.
THE ECONOMIC CALENDAR AND VOL TERM STRUCTURE
This week is thin. ISM Services this morning, Trade Balance Tuesday, jobless claims Thursday. The event that matters is CPI on the 14th (next week), high impact, with the options market pricing a ±1.74% move on that expiration. The Fed lifted its inflation forecast to 3.6% last month, so a hot June print confirms that view, pushes the next cut further out, and hands the short crowd its excuse to fade this squeeze. A cool print and the cover-to-buy chase extends. Everything between now and the 14th is positioning drift under positive gamma.
I expect the July 14 headline CPI (June data) to come in below 4.0%, with the August 12 print (July data) dipping under 3.7%. The Fed is unlikely to hike in response to an oil-driven spike in CPI. As long as the narrative from the White House remains “the war is going to end at some point soon,” I do not see the Fed hiking rates at all. With President Trump favoring lower rates and roughly $10 trillion in US Treasury debt maturing throughout 2026, the incentive to avoid higher-for-longer policy is strong. Refinancing that debt from a legacy near-zero coupon into today’s rates would sharply increase interest costs, creating real fiscal pressure.
EARNINGS
Another slow week. Delta reports on Friday before the open and unofficially starts the earnings season, providing a read on travel demand and the consumer. PepsiCo Thursday before the open is the Staples check, Levi Strauss Wednesday after the close covers apparel, and Penguin Solutions Tuesday. None of this will move the market this week. Price trades off positioning and the CPI setup.
MOMENTUM PULSE CHECK
Last week, Financials ran +4.7% on the week, Communication Services +3.5%, Consumer Discretionary +3.1%, all pushing up into Improving and Leading. The defensives that led the fear trade gave it back: Health Care -2.0%, Real Estate -2.2%. Technology stopped falling and added +1.4%, still the best sector of the year, near 28%. Capital rotated straight back into the cyclicals, and high-beta it ran from just a week ago.
The single-name board says it louder. The semis that were the worst names on the screen last week are back on the right side. AMD ran +6.5% on the day, Arista +7%, with NetApp, Texas Instruments, Qualcomm, and Microchip all reclaiming green. Axon leads the five-day board up 32%, Moderna +22%, Robinhood +18%, CrowdStrike +13%. The staples that took in capital last week, Constellation, O’Reilly, Tractor Supply, and Kraft Heinz, are the red names now. The “expect more downside” rotation I flagged a week ago unwound completely.
WEEKLY EXPECTED MOVE
The options market prices an asymmetric week: +1.86% to 7,669 on the upside, -3.07% to 7,298 on the downside, outer floor at 7,112. The -1σ floor reset to 7,298, up from 7,197 last week, so the higher-low pattern that broke into the quad-witch is back on. Hold 7,475, and dealers keep suppressing volatility. Lose it, and negative gamma returns with 7,298 as the next test.
VOLATILITY REGIME
One month is still above three-month. The tape moved more violently over the past month than the past quarter, and the spread widened even as the price rallied because the rally itself was fast. Positive gamma should pull realized vol lower from here, but it has not happened yet.
SYSTEMATIC FUND FLOWS
Both CTAs and vol control funds turned. CTAs printed long every session this week and flipped to net buyer with the trend signal back in an uptrend, the same crowd that was short six of seven sessions a week ago. Vol-control sold $2.2 billion on the 30th, then paused for two days and turned to a buy on the latest print, exposure back near $178 billion and rising off the lows. The mechanical sellers that pulled support out from under the spring rally are stepping back in as buyers, foot off the brake rather than flat on the gas. That flow is the fuel behind the reclaim of positive gamma.
SYSTEMATIC POSITIONING INDEX
The combined positioning score sits below the -1σ Bearish line, deeply unwound from the Extreme Long peak in mid-May. The crowd fully de-risked and flipped net short right into the reclaim. That is the setup that squeezes: under-positioned money forced to chase a tape moving against it. The daily flows above show the chase already started, and as the 20-day rolling measure catches up to this week’s buying, this score turns from headwind to tailwind.
MARKET BREADTH
67.1% of the S&P 500 trades above its 200-day average, up from 64.5% a week ago. Breadth rose while the index rose, so the bounce reached past the semis and into the average stock. The 40% line that signals a regime breakdown is nowhere in sight. Breadth is the reason this is a rotation and a positioning unwind, not a market top, and it is the reason the bullish regime has legs.
DEALER GAMMA DASHBOARD AND COMPOSITE REGIME
Gamma, Flow, and Breadth all print Bullish; Realized Vol is Neutral. The weighted composite still reads Neutral, but the Composite Regime flipped to Risk-On the moment the price closed back above the flip.
TACTICAL ALLOCATION PERFORMANCE
Weekly proxy 18.48% on the year, daily portfolio 12.60%, S&P 500 9.98%. The daily model gained on the week but trailed the index, and the weekly proxy gave back ground from last week.
What was a ceiling at 7,450 for two weeks is a floor at 7,475, and the tape holds above it with dealers long gamma, CTAs buying, vol-control turning, and correlation in the basement. Breadth at 67.1% says the rally is broad, not a handful of names. The one caution is that the options market is still pricing more room down than up, into realized vol that has not yet calmed down.
And remember - The one fact pertaining to all conditions is that they will change.
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Best regards,
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Kurt S. Altrichter, CRPS®
Wealth Advisor | President
Disclosure
The Gamma Report is published by Ivory Hill, LLC. All opinions and views expressed in this report reflect our analysis as of the date of publication and are subject to change without notice. The information contained herein is for informational and educational purposes only and should not be considered specific investment advice or a recommendation to buy or sell any security.
The data, models, and tactical allocations discussed in this report are designed to illustrate market structure and positioning trends and may differ from portfolio decisions made by Ivory Hill, LLC or its affiliates. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.
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