SPY Crashes to $688 on Explosive Put Volumes After Failed Breakout Push

SPY opened strong near records but reversed sharply to $688 down 1.1% on massive late-day put buying amid earnings rotation fatigue and Bitcoin plunge. Options flow flipped bearish with puts dominating while WSB chatter screams capitulation. Key focus shifts to AMD post-close AI check and Thursday earnings wall as downside momentum builds.

Macro Summary

SPY intraday reversal below $688 support eyes $685 weekly low test on put gamma pinning absent AMD moonshot while volume spikes confirm rotation exhaustion. Weekly bias sours to neutral with 1-2% pullback likely into Friday earnings peak.

• MSFT free money calls fade on PE compression
• NAND memory divergence SanDisk vs MU
• BTC-USD $75k breach fuels risk-off
• SLV patching ends infinite glitch hope

Earnings avalanche probes consumer weakness through Friday with 164/185 reports risking VIX pop if retail misses mount alongside DC shutdown whispers.

Calendar Events

Earnings deluge hits 82 today capping industrials beats like ETN but post-close AMD⋆ AI guidance swings semis amid broader rotation stall. Thursday/Friday volume peaks test consumer via CMG as government risks linger.

Playbook

Bearish gamma below $688 favors SPY put debit spreads exploiting late volume cluster and AMD fade risk while fading semis rotation into consumer tests. Size puts on WSB despair signals with metals hedge via SLV shorts.

• SPY 688/685P debit spread: Captures gamma pin efficiency
• SPY 687P 0DTE: Volume leader on downside probe
• MSFT weekly puts: PE vent capitulation play YOLO: SPY 688p 0DTE reload at close on 288k cluster for sub-$685 flush if AMD whispers disappoint.

SPY Options

Feb 3 chain skews extremely bearish with late explosion in 687-690P volumes 123k-288k dwarfing calls during 1% drop.

• Bullish: SPY 690C 02-03-26 volume tail
• Bearish: SPY 688P 02-03-26 volume leader
• Favorite: SPY 688/683 bear put spread theta decay hedge Put/call ratio crushes 4x+ reverse on prior call frenzy implying dealer short gamma below $688 forcing dealers to sell spot on retail panic. Flow aligns with intraday high rejection at $697 confirming exhaustion near ATH despite early beats.

Bulls vs. Bears

Bull Thesis (26%): Lingering premarket gamma and ETN EPD beats support bounce to $690 if AMD post-close sparks semis revival overriding put prints as thin volume exaggerates moves. Low VIX backdrop and SLV chatter provide risk-on tailwind for close pump.

Bear Thesis (74%): Massive 687-690P volumes exploding on 1% drop pin gamma downside with MSFT PE fades and Bitcoin $75k breach signaling broad risk-off. Consumer cracks like prior PEP extend rotation limits as WSB capitulation vents bottom calls prematurely.

Overall sentiment crushes 74% bear on put dominance and comment despair overpowering early strength with AMD as lone bull hope.

Unknown Unknowns

AMD post-close guidance risks semis cascade lower on capex caution while government shutdown noise amplifies VIX on DC impasse. Bitcoin sub-$75k tests $68k 50-day risking crypto-equity spill.

• Bulls watch $688 bid defense for AMD reversal
• Bears eye 687P wall breach on volume fade
• Shutdown evolution volatility proxy amid earnings

Rest of week pivots on Thursday/Friday retail beats with DC wildcard curbing any snapback to flat weekly close.

Quantitative Analysis

SPY $687.79 sits 1.1% below $695.41 close after open $696.21 high rejection at $696.96 shy of $698 ATH underscoring failed breakout on 51M volume vs 81M avg signaling exhaustion. Options bearish flip with 288k 690P peak confirms dealer positioning for sub-$685 pin while BTC $75.2k -4.6% decouples deeper dragging sentiment. WSB 216 comments trend capitulation with MSFT NAND calls masking broader despair.

1. SPY day range $687-697 traps early bulls in 1% reversal.
2. Put vols 123k-288k at 687-690P yield 200% gains pinning close.
3. BTC $51B vol trails amplifying equity risk tone.

Inference points to $685 test absent AMD beat with put gamma and thin bids favoring bears through week though oversold RSI hints tactical bounce potential on positive guidance.

Summary

Markets reversed hard from premarket highs on overwhelming put protection and rotation fatigue despite industrial beats leaving sentiment firmly in capitulation mode. Earnings continue testing corporate resilience especially consumer pockets through week's end amid lingering government disruption risks creating choppy volatility. Overall conditions demand caution with downside bias but watch post-close catalysts for potential relief snapback.