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The S&P 500 sits at 7,756, down 0.02% from last week’s 7,757 close. Flat on the surface. Underneath, the tape ran a full round trip. A 2.3% drop to 7,576 on Tuesday moved dealers into negative gamma and flushed the systematic book to capitulation, then the index recovered to a 7,786 high by Friday and settled back near where it started. The index ended the week unchanged.
Asset Performance
The S&P 500 is at 7,756, up 13.30% year-to-date, essentially flat on the week. The Russell 2000 at +23.03% and Emerging Markets at +23.23% both run ten points ahead of the index, so leadership is broadening past mega-cap. Gold added 10.43% on the month to sit +3.37% YTD, the best month of any major, and we added 4% on July 31st.
Implied Correlation
CBOE 1-month implied correlation rose to 8.81 from 7.38 in last week’s report, crossing back above the 8 line into elevated. At the 16th percentile over two years, it is still historically low. The bounce off the lows is the tell: single names are starting to move together again, which is what a vol event does when it pulls the whole tape one direction. Extremely low correlation had kept index vol pinned and left breadth unable to cushion a drop.
Vol Term Structure & Economic Calendar
Empire State manufacturing Monday, building permits, housing starts, and industrial production Tuesday, initial jobless claims and the Philadelphia Fed survey Thursday, all medium-impact. Nothing high-impact prints until the Core PCE, GDP, and PCE price index cluster on the 26th. The vol surface reflects it, with no high-impact marker until that cluster.
Earnings
Retail owns the week. Home Depot reports Tuesday before the open, Target, Lowe’s, and TJX Wednesday, Walmart Thursday, Ross Stores Thursday and BJ’s Friday to close it out. Walmart and Home Depot are the consumer read: guidance from either sets the tone for whether the spending that has held GDP together is still intact. Analog Devices reports Wednesday and carries the analog semi cycle. Deere and Alibaba round out Thursday.
Sector Momentum
Energy came back. XLE moved further into the Leading quadrant, up 3.7% on the week and back near the top of the YTD range after sitting in Weakening in last week’s report. Technology still holds the highest YTD return, but XLK’s arrow points down: up 2.4% on the week with 5-day momentum cooling. Utilities gained 2.3% on the week off a low YTD base, the only name improving from the left side. The laggards are unchanged, with XLY down 2.5% and XLC down 1.0%, both negative YTD and negative on the week. The rotation is energy taking back leadership while tech’s short-window momentum fades.
Single-Name Momentum Universe
The dispersion narrowed but stayed wide. STX is the standout, up 20% on the 5-day after sitting down 5% in last week’s report, a full reversal. TPR sits at the opposite pole, down 20.5%. That 40-point spread is tighter than last week’s PLTR-to-PODD range but still extreme. GLW led the single day at up 5.1%, PWR up 3.2%. The energy-linked names cluster green on the 5-day, with NRG, EQT, WMB, KMI, and CEG all positive, consistent with the sector rotation. CSCO and EBAY both sit down 8%, the two names dragging the middle. Last week’s mega-cap leaders, PLTR and GLW on the 5-day, folded back into the center cluster. Leadership rotated.
Market Structure: Gamma Flip & Weekly Expected Move
The gamma flip sits at 7,730. Spot level is 7,756, which puts dealers 26 points into positive gamma. That is a thin cushion. A week ago dealers held 148 points above the flip, and the mid-week drop pulled spot to the line and briefly through it before Friday’s recovery reset the buffer. Dealers long gamma sell strength and buy weakness, suppressing range as long as spot holds 7,730. Below it they flip negative and any move down accelerates, exactly what the 11th delivered.
The one-sigma weekly move runs about 2.3% to the upside toward 7,932 and 1.5% to the downside toward 7,640, off 12.0% IV. The band is wider up than down. GEX at 7,730 sits just below spot, so the flip line and the operating floor are the same number this week. Revisit that level through the week so you don’t surprise yourself out of a trade. A hold keeps the vol suppression on. A break turns dealers into sellers.
Volatility Regime
One-month realized volatility is back below the three-month, resolving last week’s inversion and returning the regime to low-vol. The 30-day reading fell through the week even with the 2.3% drop on the 11th, because the fast recovery kept the realized print contained. The signal that fired high-vol in last week’s report has reset.
Systematic Fund Flows
Both algos turned back to buying after the recent toilet flush. Vol-control was a net buyer of 4.5 billion over five days, with 1.3 billion Thursday and 3.5 billion Monday as realized vol fell and the roughly 300 billion machine re-leveraged. Its absolute allocation sits at 224.2 billion, up from 216.4 in last week’s report.
CTAs are a little messier: net buyer by a hair over five days, but the daily flow flipped short Tuesday, long Wednesday and Thursday, then short again Monday. The vol-control bid is back and mechanical. The CTA bid is indecisive and could break either way into the PCE print.
In absolute terms, the complex is still long. Vol-control notional exposure and the CTA trend signal both sit near the top of their ranges, so the level is heavy even as the recent five-day change turned choppy. Here is the tension: high absolute positioning with little dry powder, sitting on top of a book that just got flushed and rebuilt.
Positioning Index: Systematic Z-Score
The combined CTA and vol-control z-score sits near negative 0.7, recovering from a capitulation low below negative 2 sigma during the mid-month drop. Here is the divergence to hold onto: the index is at its highs while systematic positioning sits below neutral. The algos de-risked hard and are only partway rebuilt. Unlike last week, when the z-score sat above neutral with no dry powder, the flush restored room to re-lever. This is a cleaner setup for the bulls, provided PCE does not fire vol back up.
Market Breadth
Breadth is 74.4% of the S&P 500 above its 200-day moving average as of Friday, up from 73.2% in last week’s report.
Dealer Gamma Dashboard
All four component signals read bullish: gamma, realized volatility, flow, and breadth. The weighted composite lands neutral, and the regime output is Risk-On. The allocation holds at 75% SPHB and 25% SPXL for a third straight week, high beta over leveraged beta.
Tactical Allocation Performance YTD
The weekly sleeve sits at 27.13% year-to-date against the S&P 500 total return at 14.54%, running 12.59 points ahead. The daily sleeve is at 17.90%, ahead of the index by 3.36. Both beat.
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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