More Downside to Come

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. Screen Shot 2016-06-25 at 4.44.26 PM

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.Screen Shot 2016-06-25 at 4.43.34 PM

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. Screen Shot 2016-06-25 at 4.37.30 PM

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.

SPX Quarterly:SPY.qtr

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.QQQ.QTR

IWM Quarterly: If it can’t get back above 115 there could be some delta hedging waterfall action. IWM.QTR

Below is the weekly SPY open interest which is likely to change throughout the week. spy

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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