Options Market Makers Win Again! 💵 + Inflation Data ☝️

Daily Market Model Update for 6/9/25

*This one is long, make sure you click through to the site to read it, because your email provider might cut off the bottom of the email and there are some good charts in there at the bottom!*

Welcome to the Daily Report where I review what happened in the past trading day, the driving forces behind the moves🚀. At the end of the day, I publish the signals from a Short-Term trading portfolio that trades between 4 -10 day holding periods (currently beating the S&P500 by a lot this year), an Intermediate Term Portfolio that holds for about 3 months on average targeting 15-25% yearly returns, and the actual signals I use for trading my retirement accounts using mean reversion (5 different systems that average 10-20% yearly gains on the indexes). Everything comes with back tested results on the setup📝 and the entries and exits always happen at the end of the day so you can buy and sell in the after-hours session (or on the open the next session if you prefer). I personally trade these signals, so there is no funny business here. I eat my own cooking🍳.

Let’s review what happened today!

What Drove Today’s Move

Today was generally a pretty positive day with a lot of buying under the surface. This morning, we pointed out heavy resistance at the 600 level on SPY. If you look at the Gamma Profile, it’s pretty clear there were a lot (I mean ALOT) of calls sitting there.

Gamma Profile Shows Calls at 600 SPY

Market makers don’t generally want to pay anyone any money for buying a stock option, so today we were playing for 600 to be heavy resistance, but if we did manage to push over it, we knew it would start to cause buy programs to pop off as market makers needed to hedge heavy Call exposure by buying futures. Just so you can see how Gamma Exposure works, look at the red line in the chart below - that is 600 on SPY where all the Calls reside.

Buy Programs Popping Off as We Pushed Over 600 This Morning on SPY, Didn’t Stick into the Close Though

Once we pushed through that level late in the morning today, we got a bunch of buy programs popping off (those are the yellow dots with pink arrows). But in the last hour, we saw a lot of selling take over as Market Makers guided the market a few pennies under 600, so that none of the Call Buyers made any money today. It should be illegal, but it’s not. 😢

If you are trying to learn to Day Trade and you don’t understand these dynamics, it can be very frustrating. That’s why we spend a lot of time on these concepts in the Morning Note. I don’t want to say it’s ALL that matters, but a lot of the intraday action now is dominated by Market Maker hedging.

We got some good inflation data today and it isn’t something a lot of people cover, so I’ll break it down here. 📝

The Fed does a Survey of consumers to figure out what they think about inflation. This month expectations for inflation out one year declined by 0.4% to 3.2%. That’s pretty good - and the expectation decline was broad based across pretty much every population. So, people are starting to think because Trump is caving on the Tariffs, the inflation will go away / not appear. This is a terrible idea. 👇

There was one area though where inflation expectations were still skyrocketing - and that is Food Prices. Expectations for food prices one year ahead actually ROSE by 0.4% to 5.2%. This is the highest since Oct. of 2023.

This is a good example of people holding two contradicting thoughts in their heads at once. If food prices are skyrocketing, inflation can’t be going down. But that is what the Survey is showing. Inflation is coming, a lot of it too.

MSFT 0.00%↑ if up 8 in a row, which you can see has not been a great time to own the stock lately. Each time we have needed to either trade sideways for a couple months or we sell outright and go down for a correction. I’ll review which one I think is more likely for subs at the end of the note.

MSFT Up 8 in a Row - Time to Take Profit