Investors are grappling with a complex mix of market signals, leading to increased put buying and a bearish sentiment in the S&P 500. The significant decline in Nvidia's stock, which has dropped around 16%, is adding psychological pressure on the broader index. Systematic strategies and ETFs are contributing to the selling pressure, potentially exacerbating the downward momentum. Despite these challenges, the market shows resilience, with the 6,000 level on the S&P 500 emerging as a critical battleground due to substantial open interest and neutral gamma effects. The historically low correlation of implied volatility across S&P 500 stocks suggests that the current selloff is primarily an AI risk-off event, rather than a broad market downturn.
The SPDR S&P 500 ETF (SPY) experienced a decline, dropping 1.93% to $596.24 at 1:00 PM on Monday, January 27.