Market 10/20: SPY finds bottom at 420 on OpEx day

SPY tries to find support amid political tensions

Market opens on OpEx trading day entirely in negative gamma zone below SPY~430. Selling pressure from short-term puts above pulls SPY down to near 420, where gamma influence gradually diminishes as in yesterday's analysis.

After first 3 hours of opening, buyers start appearing as European markets close, plus most puts at 420 gradually expire, pulling market into temporary rally taking SPY just below 425.

Right then, news of political tensions in Baltic Sea region emerges, extinguishing buy the dip flows and redirecting options flow to next week's hedges to prepare for news end of this week with SPY~420 entirely puts.

However, most hedge volume concentrated on exp 11/17 to cover FOMC. With 10Y yield retreating below 5% today and SPY holding above put wall 420, if no additional macro tension events end of week, VIX mostly returns below 20 creating a "quiet" period for market shorts-cover rally early next week.

Chinese ship suspected of sabotaging Baltic Sea telecom cable

Tensions continue after Finland, a NATO country, accused Russia of sabotaging its gas pipeline last week, this week Sweden accuses Chinese ship of damaging telecom cable between Sweden, Finland, and Estonia.

Philadelphia Fed Manufacturing Index warns of unpromising economy

Philadelphia Fed Manufacturing Index in October hits -9 indicating bleak economy, with nearly 35% of businesses reporting reduced general activity in the month.

Overall, many companies report increases in raw material prices and product prices. Delivery time quality remains poor (near all-time lows) signaling supply chain difficulties.

Besides Philadelphia Fed, Empire manufacturing index also shows positive employment growth in October, although hours worked declined.

Oil prices continue rising due to Middle East crisis

Although oil flows not greatly affected, market remains vigilant as 1/3 of global supply and demand faces geopolitical stress in Middle East.

Oil prices up 10 USD/barrel since war erupted and expected to soon hit 95 USD/barrel.

UAW negotiates contracts amid inflation concerns

UAW and General Motors gradually advancing toward new labor contract negotiations:

GM, Ford, and Stellantis all propose wage increases for workers and restoration of inflation-fighting measures.
UAW walks out of some factories, ready to expand strikes if negotiations stall.

However, even with desired wage increases, UAW wages struggle to keep pace with private sector due to inflation.

Cost of living continuously rising high for years, so expected 20-30% wage increase may not be significant.

In conclusion, regardless of final negotiation outcome, workers, especially those starting after 2007, have faced significant purchasing power erosion over decades.