From yesterday afternoon's analysis by Viet Hustler:
"Overall, the market is set up for a short-cover rally up to SPX~4300 from a positioning perspective with a huge amount of short-term puts at SPX~4200. Currently, VIX is being pinned below call wall 20, reducing the impact of the puts above somewhat and creating fuel for the market rally as the puts start to decay at SPX~4200 or buyers accept rolling off hedges to next week."
The market opens the final trading session of the week with a strong gap down after the surprise jobs report creating a shock in the bond market in the morning. 10Y yield surges strongly through the high to 4.9%, pulling SPY/SPX back to backtest the important put wall at 420/4200. Here, as analyzed in yesterday's article, the amount of short-dated puts expiring today is too large, combined with VIX being pinned below call wall 20, forcing put holders to start covering positions and accept rolling off hedges to next week. The sudden drop in negative delta creates conditions for market makers long gamma and produces a strong shorts-cover rally pulling SPX up to 4300.
