Anna Coulling > Stock Market Analysis > SPY levels now super critical along with understanding call walls and put walls in the options market

Current SPY levels are now critical. We dive deep into the options market to explain call walls (resistance) and put walls (support), how large option clusters drive dealer gamma hedging, and why these invisible levels often dictate short-term market direction. Essential viewing for anyone trading SPY or wanting to better understand options-driven price action.

SPY levels now super critical along with understanding call walls and put walls in the options market

00:21

Live stream introduction and market overview

00:21

The host welcomes viewers to the live stream taking place in the afternoon UK time. They explain the timing choice, noting that the start of the new month has been interesting due to notable price action across various financial instruments. The host expresses eagerness to dive directly into discussing these market movements.

00:59

SPY daily chart and end of month reversal

00:59

The speaker reviews the SPY chart, highlighting a dramatic reversal at the end of the month characterized by substantial volume and a notable candle size, though they expected a slightly larger candle given the volume. They also point out a gap up seen this morning and emphasize the market moving higher, focusing on the significance of breaking the 650 level. Additionally, the discussion introduces how the options market is influencing price action not only in SPY but also in popular individual stocks.

02:23

Options market impact and call wall at 650

02:23

The discussion focuses on futures, particularly those used by option dealers and market makers to hedge risk. The 650 level is highlighted as important due to a significant ‘call wall,’ representing a large cluster of call options from traders expecting the market to rise. This clustering effect influences the behavior of traders, especially retail traders, impacting stocks, ETFs, and sometimes futures markets.

03:06

Retail traders tend to cluster their trades around specific strike prices, typically at zeros and fives, which poses challenges for market makers and option dealers who must manage the opposing side of these trades. This results in a complex book of orders that the dealers need to actively manage, influencing price action in the market.

03:52

An unusual price action pattern is observed, characterized by concentrated volume at specific price levels on daily charts, which is particularly noticeable to options traders. This concentration leads to distinctive market behavior that may be unfamiliar to those new to options trading but is important to recognize going forward.

04:35

During a congestion phase, the charts show many compressed, small candles accompanied by volume, indicating price being pinned at certain levels. This differs from typical congestion patterns, especially at market tops, and suggests a distribution phase where price movement is restricted at specific points.

05:13

Congestion phase and managed decline analysis

05:13

The speaker discusses a scenario where despite above-average volume and anomalies, the price remains stable without significant upward or downward movement. This behavior reflects underlying activity in the options market. They introduce Wyckoff’s second law, explaining that prolonged congestion builds cause, leading to a stronger break lower. However, the recent break lower has lacked the expected volatility, suggesting a ‘managed decline’ rather than a typical volatile drop.

06:25

The concept of a managed decline is further elaborated, highlighting the absence of the usual fast, volatile moves typically seen in market downturns. The speaker compares the current period to a similar time last year, noting differences in volume and volatility. They emphasize the significance of this comparison, which supports the view that the current market behavior is unusual, with congestion and below-average volume preceding the break lower, contrasting with previous patterns.

07:46

Comparison with previous market moves and geopolitical risks

07:46

The speaker discusses price action in March and early April, highlighting a period of market congestion followed by a downward move. This movement is linked to the introduction of Trump’s tariffs. Additionally, geopolitical risks such as conflicts in Iran are noted as background factors influencing trading.

08:15

The explanation continues about market congestion and the expected price action following it. The speaker suggests that the market did not break lower significantly, indicating a controlled decline rather than a sharp drop.

08:48

The speaker describes this decline as a ‘managed decline,’ influenced by options market dynamics. Large concentrations of options at specific strike prices—called call and put walls—create support and resistance levels that complicate price movements and impact market makers’ strategies.

09:27

Market makers hedge their risk by buying and selling the underlying assets or using futures due to the high volume of options contracts at key strike prices. This hedging activity helps prevent the market from moving too far in either direction, particularly in instruments like SPY.

10:05

Options market influence on futures and stocks

10:05

The speaker explains that retail traders often trade options or the underlying assets like futures and single stocks, emphasizing the importance of understanding the market drivers behind the scenes. They highlight the roles of market makers and specialists and introduce the concept of another market exerting significant influence. Despite this complexity, the speaker stresses that volume and price analysis remains crucial and even more effective as a tool to identify key market movements. Tools like Cheddar Flow and Unusual Whales help traders pinpoint important option strike prices and levels.

11:29

Resources for tracking option strike prices

11:29

The speaker discusses options data resources, recommending Barchart as a free platform with delayed data and ads, but useful for accessing raw options metrics like the 650 call wall. They then analyze the SPY market, describing a managed decline and a reversal triggered by the failure to break through a resistance level. The 200-day moving average (200 MA) is mentioned, not for personal conviction but because many market participants regard it as significant.

12:44

The speaker elaborates on the significance of the 200 MA, noting multiple failures to break above it, which likely led to the market moving lower. Despite high volume, the decline lacked volatility or dramatic moves, indicating anomalies to watch out for. They confirm the 650 call wall has been breached successfully. Moving to a faster timeframe, the 10-minute SPY chart shows a gap up in the morning followed by typical FOMO (fear of missing out) candles, highlighting short-term market behavior.

13:57

SPY 10-minute chart and FOMO candle explanation

13:57

The speaker explains the importance of Volume Price Analysis (VPA) in understanding market anomalies, linking chart movements with options market levels. A key level at 650 was breached this morning, shifting the trading focus to current price action. The market opened with a gap up and a strong upward candle, triggering a volatility indicator known as the FOMO candle, but the initial volume was weak compared to previous periods.

15:12

After the initial jump in price, the market quickly reversed, but the low volume on the downward move indicated it was a trap for traders rushing in. The speaker emphasizes the difficulty and necessity of cultivating patience in fast-moving markets to avoid emotional and financial losses. Understanding price action, volume, and the broader market context helps traders maintain belief in their strategies and avoid impulsive decisions.

16:28

Beyond technical analysis, the speaker highlights how mainstream financial media shapes narratives that may not reflect market realities. Traders must recognize that media reports often present a constructed version of the truth, encouraging critical thinking and independent analysis of market conditions.

17:04

Volume, price action, and media narratives

17:04

The speaker explains that the true market situation is reflected by price action and volume on the chart. They identify certain price moves as fake due to insufficient volume or price patterns. The VWAP (Volume Weighted Average Price) is highlighted as a key level that traders watch closely, especially for retests or moves back to this level. Additionally, the speaker references the Camarilla levels and discusses the significance of a particular candle, termed the ‘FOMO candle’ or opening range, defined by its high and low, which must be meaningfully breached to confirm market direction.

18:14

VWAP and Camarilla pivot levels importance

18:14

The discussion focuses on the significance of the VWAP as a confirmatory signal in price movement, particularly at the R3 level of Camarilla pivots, which are known for causing price consolidation or congestion. The price action is observed to be consolidating around this level, coinciding with the VWAP. The Volume Point of Control (VPOC) is noted but found to be irrelevant at this moment as it is positioned lower. Volume is moving sideways with small candles, indicating low volatility and minimal price movement.

19:22

VPA indicators suite and volume price analysis

19:22

The VRSI is part of a suite of indicators developed by David and the speaker’s quantum trading company to support volume price analysis (VPA) methodology. This suite, called the VPA indicators, includes tools like VWAP, a volatility indicator, the VRSI, and the Camarilla, among others. The speaker references a recent post on X describing a market trap at the VWAP level and emphasizes the importance of patience. The Camarilla indicator is highlighted for its ability to predict target price levels, such as aiming for 657, based on current price and volume analysis.

20:29

Key resistance levels and market patience

20:29

The speaker discusses analyzing a chart independently of options market influences, noting that call options often cluster around round strike prices, particularly around the 660 level, which is a key target for bullish traders. They emphasize the importance of patience when approaching significant price levels, as the price may pause or retest before breaking higher. Volume analysis is crucial to confirm the validity of these moves. The speaker prefers using a 10-minute chart for clearer signals, then zooming into faster time frames like 1-minute charts to observe candle behavior and volume more closely. Recent price action shows a modest upward move with steady volume and small candle sizes, indicating cautious market activity.

22:15

Faster timeframe analysis and volume anomalies

22:15

The speaker examines market activity on a faster time frame, specifically the 1-minute chart, to identify subtle movements and anomalies not visible on the 10-minute chart. They note a slight upward drift and highlight the significance of volume on down candles, which are high but do not correspond to price drops, suggesting a genuine move. The speaker plans to discuss volatility further and consider alternative futures for those uninterested in SPY and options, before passing the discussion to David.

By Anna Coulling – creator of volume price analysis

By Anna Coulling – creator of volume price analysis