The S&P 500 is navigating a turbulent trading session, with increased put buying indicating a bearish outlook among investors. This sentiment is further influenced by a significant drop in Nvidia's stock, which has fallen approximately 16%, adding psychological pressure to the broader index. Systematic strategies and ETFs are contributing to the selling pressure, potentially intensifying the downward momentum. Despite these challenges, the market is showing resilience, with the 6,000 level on the S&P 500 acting as a critical support point due to substantial open interest and neutral gamma effects. This stabilization is aided by dealer hedging activity, while the 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 Direxion Daily S&P 500 Bull 3X Shares (SPXL) experienced a significant decline, dropping 5.78% to $175.24 at 1:00 PM on Monday, January 27.