Panic-Buying At Cash Open Erases Powell-Plunge; 4200 Is S&P’s “Line In The Sand”

US equity market tumbled on The Fed’s ‘hawkishness’ yesterday, then recovered when Fed Chair Powell demanded traders ignore the dotplot… and then tumbled back to the lows overnight.

But thanks to endless jawboning and David Tepper, a buying panic has struck at the cash market open and Small Caps have erased all of those losses…

Just a quick reminder, here is what Tepper said in 2013 as The Fed threatened to taper…

“I think the stock market is still fine for now,” Tepper told Wapner.

Stocks are on their own in panic-buying land once again…

So what happens next?

As SpotGamma reports, futures tested 4190 (SPX 4200) overnight but recovered some to 4200. This level is critical support for markets, as gamma is negative under there. Simply put, a break of 4200 is risk off. For today, 4225 is the key overhead area due to the large amount of gamma at that strike.

There are times wherein we mark risks as quite high, and we see this as one of them. This, of course, does not mean that markets decline sharply but our models see that as a distinct possibility and so we are lending a bit more focus to that “tail” in this note.