Finally the S&P tested the 50-day moving average so that I can stop talking about it, though I don't think it's quite finished.
The Fib level is 1652.62. It feels as though the market senses it (together with the 50dma), but in looking at the 10-yr note futures, there could be more bumps along the way.
I did not, however, see a volume expansion on yesterday's down move. I find this significant. I wouldn't be betting on volume today, either. So the S&P will have to find some big down volume probably next Tuesday, Wednesday, or Thursday, or else this will likely end up as just another sharp, quick correction.
DVOL (declining volume) wasn't impressive either, even though yesterday showed a -1300 down tick. Haven't seen one of those for a long time. Also, the VIX did not jump as high as I would've thought.
None of this is to say there can't be more downside. It's just that it's got to get a lot worse to be a lot worse. But a lower test could still come.
Below the market is the 38% Fib, the 1650 volume shelf, and even the 61.8% Fib level at 1617. All are fair game. Above 1684.91 would be an early warning to the bears, and above 1696.81 would likely trap them.
There were a TON of SPY puts traded at 165 (but curiously the current open interest shows the level at least -100,000 contracts fewer than yesterday which is weird), and most of the OEX option open interest are puts below current levels (740 and below). Rarely do that many people get to be right on op-ex. My sense is that there is an op-ex bounce today and that the market closes above 1650, possibly into the 1670s. The expiration game is to see as many options expire worthless. It doesn't always work out that way. But try to understand how the game is played so you're not part of the amusement of others.
Hi Marz,
ReplyDeleteI like your insights very thoughful.
Would like to know how are you positioned.
I am looking at lot of things and here is what I plan. Bought Vix calls for next week.
1. Unload my IWM sep puts(90 and 77) midweek if we get a good downswing.
2. Reload some SPY calendars diagnoals if NYMO is very oversold.
3. Planetary motion not very favorable till sep 6th.
4. May be ramp up from sep 6 to sep 18th and then downswings next month.
Bill
Sorry for late reply (I usually turn the blog "off" around mid-morning and take weekends off). My inventory is all over the place and not really recommended. Still holding some ill-timed SPXU hedged with SSO which had caused me to be more conservative, Sept VIX 17 calls, SPY 100 puts way out in 2014, Sept SPY 167 calls. Noticing lots of decay with inventory (more than expected). Intraday trades have been more favorable but still tricky. Hoping the market is beginning to snap out of its indecision period. Not convinced either side has concluded its business yet, and I agree with your ideas.
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