Triple Threat March OPEX + What SPY Open Interest May be Suggesting

Last week was rough. It was difficult to make money on either side. As I mentioned last weekend the best strategy for now is practicing patience. With such a volatile and choppy environment, set-ups are more likely to fail and trying to anticipate the next move is a guessing game. Next week we have a lot going on with the Ukraine/Russia conflict, the Fed meeting and Janet Yellen’s testimony, as well as options expiration. Although I do not think we have seen the so called “top,” I am seeing more to be concerned about and starting to see better short set-ups than long ones.

We are not yet oversold based on stocks below their 20-day moving averages. The most recent breakout and new 20-day SPX high was never confirmed with 20-day highs in stocks. Furthermore, there was a lot of technical damage done to many stocks last week that I think deserves noticing.

Not yet oversold: Screen Shot 2014-03-15 at 4.48.21 PM

Never confirmed with new 20-day highs with stocks: Screen Shot 2014-03-15 at 4.44.16 PM

We are very close to hitting the 50-day MA on the QQQ‘s and I would be surprised if we didn’t at least visit it. We are a bit further away on the SPX and IWM, but they are looking more and more likely to be paying a visit in the near term. Read the notes on all three charts. Note that the 20-day weekly MA’s on all three have been a place of support all through 2013 and for the most part 2014 as well (on a weekly closing basis). If we get there the reaction or lack thereof will be telling.

Screen Shot 2014-03-15 at 4.19.12 PM

Screen Shot 2014-03-15 at 4.16.45 PM

Screen Shot 2014-03-15 at 6.30.37 PM

Of course this could all be a bear trap similar to the ones we have experienced all through 2013 and we could gap and go Monday. Either way, there is a bit of a road map for the downside going into next week.

SPY Open Interest: There is some massive outstanding puts at 180. It doesn’t mean we will definitely get there, but it could become a magnet if further selling continues into next week. When there is one large strike in the direction of the trend (down right now), it’s a possibility you should at least be open to. Read more here about delta-hedging and about how one strike becoming a magnetspy.3.14

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