I’m back. Thanks for all the congratulatory comments while I was away.
This will be a short to the point. For much more relevant information take the premium plunge.
If you recall a month or two ago I repeatedly wrote in my posts that the market never reached an oversold reading that is typical of a cycle low to new highs. You can read about one such example in this post. Most regular readers already know that price action didn’t prevent me from a long bias, but there was always that missing piece. I believe that is now the set-up to wait for before a swing long.
When’s the Washout Sassy?
SPX stocks at 20-day highs: We want to see this get near zero and possibly either stay for a few days or visit in more than once.
SPX stocks at 20-day lows: This is the better gauge when getting a real washout. Getting to 80 or 90% is when you want to begin looking for a reversal signal in the market. Often there will be more than one spike near 70%, so watch for other signals in conjunction with a large spike.
SPX stocks above their 5-day MA: Short term we are oversold; however the market can easily become more oversold. Point being there is potential for a bounce (possibly several bounces) before moving lower to find a bottom.
Quarterly Expiration: I don’t have enough data to know if high strikes on the quarterly open interest affect expiration, but I will provide you the graphs below. Expiration is Thursday 6/30.
QQQ Quarterly: Anything below 103 and I would typically say it’s a buy if it was monthly OPEX. Also note that 103 could be a magnet for Thursday expiration.
IWM Quarterly: If it can’t get back above 115 there could be some delta hedging waterfall action.
Below is the weekly SPY open interest which is likely to change throughout the week.
I don’t know if there will be a swing bottom next week or in a month; but the set-up is now there. Until it comes selling rips (or catching small bounces) is your best strategy.
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