Last week here I discussed that the market likely has not seen the lows of this cycle and any news gains would likely be given back. I am still in that camp. I also said that a close above 2083 would make things more bullish. What I should have said is a close with follow through. SPX closed out at a strong 2084 on Tuesday only to give it all back the rest of the week.
Not much has changed since last weeks post so here is a quick update and then the open interest.
Breadth: The low for this current cycle is likely not in; however, the market is getting close to oversold levels as sentiment is also creeping into more bearish readings. Thus, some more downside early next week will likely lead to a decent bounce. However, moving up first would be more of the same and gains would like be given back quickly.
SPX stocks at 20-day highs: Finally pushing below 5%. A little further push down for a day or two would be a much better long opportunity than if a bounce comes first.
SPX stocks at 20-day lows: A higher high is a good start, but not enough. Thus, more lows are likely coming in the near term.
Total put/call: creeping higher and finally got above February levels, but a further jump (that aligns with the above making extremes) would be more suggestive of a intermediate bottom.
SPY open interest: Next week is monthly OPEX and that often leads to either better pinning or delta hedging waterfall moves. More often than not it’s the former, but always be aware that the latter tends to happen more durning monthly OPEX then weekly expiration. Having said that, at this point the SPY open interest doesn’t have enough high put strikes yet (that could change as the week progresses) to make delta hedging very likely, but note the IWM open interest does.
Taken at face value the best pin is 205 and thus price may vacillate in a range both under and over 205, but somehow always gravitate back to it. Thus, there is a good chance of more chop next week where prices moving into support below 205 are long opportunities and resistance above 205 short opportunities. Note that should prices stay near or above 205 for most of the week, it may increase the odds of a flush below 205 by the end of the week (instead of a pin).
SPX levels of support and resistance
Over 2043: 2050, 2057, 2067, 2076, 2084
Under 2043: 2039, 2033, 2026, 2020-2022 (strong support), 2011, 2000
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