Last week here I anticipated a likely bounce before the Fed to SPY 205. It overachieved that. I also highlighted the risk of a drop due to all the puts and delta hedging. In no way was last week easy to play and I missed a lot of it being on a trip and then getting injured. Lucky me.
Just going to make this short and quick:
Positives:
- Market is at oversold levels where it has bounced before.
SPX stocks at 20-day highs:
SPX stocks at 20-day lows: 
SPX stocks above their 50-day MA:
- Seasonality is strong
- SPY open interest has puts at 205, most of which appear to have been sold to open on Friday near the close between $4.62 and $4.80. Of course, there is no way to know the motivation behind the trade, but on the surface it appears someone is expecting some upside. Having said that it could be some type of hedge or could be for a quick play on a small bounce Monday. Keep in mind if the seller holds them thru the close on Thursday then SPY just has to stay above 200.2-200.38 to at least break-even. Closing above 205 would be max profit. For the most part it’s always good to keep it in the back of your mind and see what happens with those 205’s as the week progresses, but I wouldn’t trade based solely off it. To the upside there is call resistance at 206.
- VIX expiration: This is just a weekly and so data is still new, but so far it has been pretty reliable. The VIX OI suggests VIX will close below 20 and possibly near 16 by Wednesday morning. This would support a rally in the market.
Negatives:
- market in a short-term downtrend
- lower highs
- tax selling
- Fed uncertainty and fear
- Global equities
Except for tax selling none of the negatives are imminent threats, but part of a more intermediate term bearish outlook.
Thus, based on the information above, there exists good risk to reward of buying any further dips below 200 or where the market closed Friday. Should the market fail to hold any bounce, 195 is the next higher puts and near a gap fill. Over the bigger picture the market has likely not put in a bottom (unless it does so next week), so any rips into support presents a good short opportunity.
Good luck! For daily and intraday analysis and real time trades check out a subscription.
Did the Crazy Weather Prevent Santa From Flying in This Year?
Last week here I anticipated a likely bounce before the Fed to SPY 205. It overachieved that. I also highlighted the risk of a drop due to all the puts and delta hedging. In no way was last week easy to play and I missed a lot of it being on a trip and then getting injured. Lucky me.
Just going to make this short and quick:
Positives:
SPX stocks at 20-day highs:
SPX stocks at 20-day lows:
SPX stocks above their 50-day MA:
Negatives:
Except for tax selling none of the negatives are imminent threats, but part of a more intermediate term bearish outlook.
Thus, based on the information above, there exists good risk to reward of buying any further dips below 200 or where the market closed Friday. Should the market fail to hold any bounce, 195 is the next higher puts and near a gap fill. Over the bigger picture the market has likely not put in a bottom (unless it does so next week), so any rips into support presents a good short opportunity.
Good luck! For daily and intraday analysis and real time trades check out a subscription.
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