Confused Enough? Weekly Outlook + SPY Open Interest

This market has been anything but easy to navigate since the start of the year. The first quarter is nearly over and we are currently up, but only by about one percent. Last week was full of noise with Crimea, Yellen, OPEX, etc.  It’s very hard to make meaning of all that happened as most of the gains took place in the gap up Monday morning. Add to that, after Yellen clearly stumbled by voicing a possible rate hike in six months, treasuries began to sell off only to reverse course on Friday.

Speaking of Friday. The market opened, made new highs and then gave everything back and then some. The bleeding began with the biotech sector, which took the NASDAQ down with it. The biotech’s had already been showing signs of deterioration, but Senator Waxman (who will be retiring at the end of this congressional session) apparently wants to be known for popping the biotech bubble. In case you missed it, he has sent a letter to GILD asking them to justify the price of their Hepatitis C drug. Although I consider it just noise, it finally gave the market reason to begin selling off the froth in the biotech stocks.

There is no denying that things look to be deteriorating within our market. The momentum stocks have barely moved or have been dropping. Granted, this shouldn’t be a surprise to anyone considering how much they have run over the last year. In fact, I wrote about that here, at the very start of the year and it’s particularly relevant now so take a look. I’m not sure what to expect next week, but I will be watching treasuries, the VIX, financials, semiconductors, and the health or lack thereof in momentum stocks.

SPY Open Interest: Well well, what do we have here? If you missed it, on Wednesday right before the FOMC decision there was a HUGE block order of the 190 calls. We have no way of knowing if this was a hedge or an outright bet. Regardless, I surmise that it was bought with regard to the outcome of the meeting and not about what is going to happen next week. We had a similar open interest on SPY earlier this year (first week of February) and those calls expired worthless. I don’t this can help us determine if we go lower or higher next week, but I would say we likely won’t go over 190. SPY.3.22

I now have my premium service page updated with some information if you have not already seen it or reached out to me. I intend to have a way to sign up on that page toward the end of next week as I plan to begin the service at the start of April.