You’ve heard it again and again. Or at least you have if you frequent these hallowed pages. It’s hard for stocks to move around when the “gamma pin” dynamic is in play.

Various manifestations of vol-selling have been a remarkably (and, more to the point, reliably) profitable trade in 2023. Consistent profits from vol-selling have a way of pulling in more vol sellers.

One knock-on effect is that, as Nomura’s Charlie McElligott reiterated on Wednesday while describing vol as “aloof,” “dealers remain stuffed on gamma,” which helps to explain why the S&P tends to “revert” to unchanged “like a tractor beam.”

“From this options positioning perspective, I see no real opportunities for excitement via dealer accelerant flows, unless we vacuum down through 4400” on the S&P, Charlie went on.

That doesn’t mean stocks absolutely can’t budge, it just means that absent some catalyst the causes equities to careen lower, it’ll be hard to get that “selling begets more selling” dynamic which exacerbates directional moves. Indeed, the opposite is likely to be true: Dealer flows will insulate spot from big swings.

Relatedly, VIX futures are now implying 1% daily moves for the S&P. The index needs to realize those implied swings, otherwise “vol will continue to stay on the back foot and over-supplied,” as McElligott put it.

What, outside of a big hawkish surprise from the Fed or, later this week, the BoJ, could break the spell? Charlie’s answer: “We would need an economic ‘tail’,” where that could mean one of two things:

1. Either an inflation upside shock which would get Fed terminals moving higher again when the market thinks we’re already there; or
2. A surprise back into ‘hard landing’ after everybody has capitulated into ‘soft landing,’ which maybe looks like labor finally rolling over with a negative NFP shock

How likely are either of those events? Not very, or at least not if what you’re looking for are shocks of a magnitude sufficient to truly constitute game-changers.

Sure, a negative NFP print is inevitable eventually, just like a recession. But to make “hard landing” Great Again (sorry), you need a big, out-of-the-blue jobs downdraft that prompts everyone to pull the recession timing Back From The Future (sorry again).

On the inflation point, it’s really hard to see how we get an upside surprise big enough to put more than one additional rate hike on the table. Knock on wood.