S&P 500 Stuck at 7,500 as Correlation Index Surges
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- S&P 500 is whipsawing around the 7,500 level, with options traders buying dips below 7,500 and selling rallies above it, per SpotGamma and Barchart positioning data.
- SpotGamma founder Brent Kochuba warned clients that a break below 7,450 on SPX would open the door to a bigger downside move, as dealer hedging flips to "negative gamma" beneath that level.
- Combined open interest of puts and calls on the SPY ETF is highest at the 750 strike, according to Barchart.
- Cboe's 1-month implied correlation index — measuring expected correlation among the top 50 S&P 500 stocks — hit an all-time low of 3.3 on July 10 before surging to over 12 this week, a sign the market is moving from AI-led polarization toward a broader-based rally.
- Wednesday's post-Fed-meeting sell-off in the S&P 500 was notably narrow, with only one stock in the index registering a 52-week low.
- Prior market bottoms saw the correlation index climb far higher — reaching 20 in June and 45 in April — suggesting the current reading of 12 may not yet signal a durable floor.
Why it matters: Traders anchored to 7,500 as the line between dip-buying and a dealer-driven slide are watching Cboe's correlation index as the second key tell: the jump from 3.3 to 12 reflects broader participation, but April and June bottoms required readings of 45 and 20 respectively, meaning the S&P 500's recent balance could prove fragile if correlations don't climb further.
