How Bad is This Correction? + OI for P, TWTR, YELP – Feb 4th

Yesterday I wanted the market to close so the selling would cause I was so bored.

Yesterday I wanted the market to close so the selling would stop….today cause I was so bored.

  • Apparently retailers are on strike this year….either that or they are all going to KORS. What a great pop…. It was backed by those #WiseGuys. See here to see where I mentioned it last week.
  • AOL is back up so my thanks to anyone buying.
  • Chart of the day: – it’s actually a table taken from this post that shows the 24 most significant peak-to-trough declines from new highs since the bull run began in 2009 via @VIXandMore (view entire post here). Here is what I find interesting and possibly troublesome. The current 6% pullback is pretty much in line with the median. We also have shown signs that we are close to putting in a low (if we haven’t seen the low yet). I took a look at the duration of those pullbacks and the average is longer than the two weeks we took to get to 6%. What does that tell me? It could mean nothing and we are just having a shorter time frame correction or we may chop around and/or go lower for a while before resuming an uptrend (which aligns with seasonality trends and a weak February). It would also go with my thesis that we may not get a “V” shape reversal higher like we did so many times in 2013 making it trickier to find the so-called ‘bottom.’ SPXpullbacktable020314_zps20507397
  • Another cool set of charts comes from this post which looks at short time frame corrections from highs over time:

The charts below show every time since 1928 that we saw a similar occurrence. Each of these dates highlight a period when the S&P went from closing at or very near a 52-week high, to closing at a 70-day (or more) low within two weeks.

We can see from the charts that this proved to be an intermediate-term buying opportunity every time. Three months later, the S&P was higher all eight times, averaging excellent gains of more than +8% on average. It took the S&P about two months to recover and close at a new high, with a further loss of an average -1.6% before doing so.

  • Tweet of the day: Nobody was that funny (seems to be a theme on down to flat days)…but I like this sarcasm Screen Shot 2014-02-04 at 4.13.10 PM
  • Social media names TWTR, P and YELP report tomorrow.  Here is the weekly open interest and implied volatility for them (this does not include any of today’s option purchases as the information is not available yet).

TWTR – weekly IV: 179%. Options pricing in + or – $9.7


YELP: weekly IV: 171%. Options pricing in + or – $10.8. Also according to @WallStJesus YELP saw an opening buyer of 300+ May $90 calls @ 7


P: weekly IV: 151%. Options pricing in + or – $4.8 p.2.3

Job #’s Friday, but first let’s see what tomorrow brings besides another snow storm.