In last weeks post here, the main take away was that there would likely be a break of either SPX 2040 or 2070, but that neither would likely lead to a large move. I also mentioned some breadth divergences that were beginning to creep in, but were not yet at a point that shorting was encouraged.
As we now know, 2070 broke to the upside and managed to tack on about 10 points. There is very little change from last week to the overall market picture. For the last two weeks all pullbacks have been very minor and intraday breadth internals only slightly negative suggesting a lack of any meaningful selling pressure. Also, as mentioned last week, there continues to be some minor breadth divergences with higher prices (some shown below) that should be monitored, but for now are only suggestive of a possibly sluggish SPX or potential for minor pullbacks. The bottom line is that until more significant selling pressure shows up (and yes that could happen as early as Monday), the least of path resistance is sideways to up.
Breadth:
SPX stocks at 20-day highs: Still diverging with price as it continues to make lower highs as price makes higher highs. Should that continue over the next week or two, it likely will put pressure on price. 
SPX 52 week highs minus lows: Again another divergence that doesn’t necessarily lead to an imminent drop in price, but continued divergence leads to subdued returns and then eventually a pullback/correction. 
SPX total put/call: Of most concern perhaps is the lack of protection (complacency) in the form of puts being purchased. However, after several backtests (using Index Indicators) the concern may be overrated as the returns tend to be muted rather than detrimental. 
SPY Open Interest: The obvious strike is 210 which has accumulated a high volume of calls. From what I understand, thanks to the help of @WallStJesus, those options were bought to open in droves and about 3/4 were already closed and (most likely) rolled out to the 4/29 215 calls. It’s difficult to interpret what the motivation for buying a large sum of SPY calls far out of the money is, as it could be a hedge, a cheap lotto, or someone that has high conviction or knowledge. In this case the person(s) already benefitted from the trade and is either looking for more or just taking advantage of what was originally intended to be a hedge. My assumption is that most of the remaining 210 calls will close as the week progresses.* In the instance that they do not, I would view them as resistance at this point because 1) it coincides with technical resistance and 2) I think based on all the above information and including a VIX that is nearing its lower Bollinger Band, any further returns will likely continue to be gradual. 
SPX levels:
Resistance levels above 2087.84 (Thursday’s high): 2093, 2103, 2111 and all time highs.
Support levels below 2076 (Friday’s low): 2074, 2065, 2050. A breach and close below 2065 next week would put the recent breakout in jeopardy.
In sum, the weight of the evidence continues to favor higher prices and a buy the dip mentality. However, given the minor divergences that are slowly stacking, the low VIX and the put to call ratio, any further price increases are likely to continue to be slow or hampered. A break and close below 2065 next week would put into question the current uptrend and require a re-evaluation of short-term strategies.
*I will update the SPY open interest via Twitter and Stocktwits should it have any meaningful change throughout the week.
For more thorough analysis come join SassyOptions. Members receive two thorough posts each weekend along with intra-day analysis and real time trade alerts during the week. Last week we had a total of eleven fully opened and closed trades. Two breakeven, four losses and five wins (263%, 149%, 78%, 16% & 11% – all taking into account scaling out). For a sample of last weeks weekend posts see Open Interest for Expiration 4/15/16 and Set-ups and Game plan for 4/11/16 which I have unlocked.
Is the high SPY 210 Call Strike Meaningful?
In last weeks post here, the main take away was that there would likely be a break of either SPX 2040 or 2070, but that neither would likely lead to a large move. I also mentioned some breadth divergences that were beginning to creep in, but were not yet at a point that shorting was encouraged.
As we now know, 2070 broke to the upside and managed to tack on about 10 points. There is very little change from last week to the overall market picture. For the last two weeks all pullbacks have been very minor and intraday breadth internals only slightly negative suggesting a lack of any meaningful selling pressure. Also, as mentioned last week, there continues to be some minor breadth divergences with higher prices (some shown below) that should be monitored, but for now are only suggestive of a possibly sluggish SPX or potential for minor pullbacks. The bottom line is that until more significant selling pressure shows up (and yes that could happen as early as Monday), the least of path resistance is sideways to up.
Breadth:
SPX stocks at 20-day highs: Still diverging with price as it continues to make lower highs as price makes higher highs. Should that continue over the next week or two, it likely will put pressure on price.
SPX 52 week highs minus lows: Again another divergence that doesn’t necessarily lead to an imminent drop in price, but continued divergence leads to subdued returns and then eventually a pullback/correction.
SPX total put/call: Of most concern perhaps is the lack of protection (complacency) in the form of puts being purchased. However, after several backtests (using Index Indicators) the concern may be overrated as the returns tend to be muted rather than detrimental.
SPY Open Interest: The obvious strike is 210 which has accumulated a high volume of calls. From what I understand, thanks to the help of @WallStJesus, those options were bought to open in droves and about 3/4 were already closed and (most likely) rolled out to the 4/29 215 calls. It’s difficult to interpret what the motivation for buying a large sum of SPY calls far out of the money is, as it could be a hedge, a cheap lotto, or someone that has high conviction or knowledge. In this case the person(s) already benefitted from the trade and is either looking for more or just taking advantage of what was originally intended to be a hedge. My assumption is that most of the remaining 210 calls will close as the week progresses.* In the instance that they do not, I would view them as resistance at this point because 1) it coincides with technical resistance and 2) I think based on all the above information and including a VIX that is nearing its lower Bollinger Band, any further returns will likely continue to be gradual.
SPX levels:
Resistance levels above 2087.84 (Thursday’s high): 2093, 2103, 2111 and all time highs.
Support levels below 2076 (Friday’s low): 2074, 2065, 2050. A breach and close below 2065 next week would put the recent breakout in jeopardy.
In sum, the weight of the evidence continues to favor higher prices and a buy the dip mentality. However, given the minor divergences that are slowly stacking, the low VIX and the put to call ratio, any further price increases are likely to continue to be slow or hampered. A break and close below 2065 next week would put into question the current uptrend and require a re-evaluation of short-term strategies.
*I will update the SPY open interest via Twitter and Stocktwits should it have any meaningful change throughout the week.
For more thorough analysis come join SassyOptions. Members receive two thorough posts each weekend along with intra-day analysis and real time trade alerts during the week. Last week we had a total of eleven fully opened and closed trades. Two breakeven, four losses and five wins (263%, 149%, 78%, 16% & 11% – all taking into account scaling out). For a sample of last weeks weekend posts see Open Interest for Expiration 4/15/16 and Set-ups and Game plan for 4/11/16 which I have unlocked.
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