Last week here I was more biased to the upside as long as SPY stayed above 195. Well it failed to stay above there and I tweeted an updated open interest that looked much less bullish, suggesting that 190 would be the next support. Buying a little ahead of that on Thursday proved to be a very nice winner. Note that we bought a little ahead of 190 because of other indicators I look at throughout the day, not solely because of the open interest. I try to give a rough guide in these posts to help direct your week, but for those looking for real time guidance consider joining us.
Overall, I am in the camp that this correction is not over; however, I am slightly more biased to the idea that we bounce first before resuming the correction. Next week is the quarter end and below I post the open interest for both SPY quarterly and weekly. Note that I do not have much data on how well quarterly open interest works, but I share it for those interested and because I believe is always helpful as an asset to other indicators.
Oversold/Overbought: As a reminder I use these to help determine potential turning points and as an exercise to see where the market is regarding an overbought or oversold cycle. The longer term indicators are all basing at what is typical oversold levels that have led to a bounce since 2013. Failure to bounce has lessoned the affect they have of being oversold and in that context I have included a shorter time frame look as well.
SPX stocks at 20-day lows: This is a bit of a longer term one, but wanted to show it because it finally spiked higher again, which has been a more consistent indicator of a potential immediate bounce. Note it reached its highest level late last week since the drop in August.
SPX stocks above their 10-day MA: At levels that begin the oversold area and where bounces have and can occur, but not yet at an extreme. Note it reached its highest level late last week since the drop in August.
SPX stocks above their 50-day MA: It has remained below 30% since the correction began and thus the immediate nature of being oversold has somewhat worn off for the time being. For future reference, upon any double bottom or lower low in SPX, gauging this for a higher low is very constructive when looking for a bottom. 
SPY quarterly open interest: If this is going to have any relevance then 190 should hold till Wednesday’s close when the quarter ends. Anything below 190, there is high odds for a bounce. Failure to stay above 190 however and look for technical support at 187/188 before looking for it at the 185 puts. For upside references at the start of the week, use Friday’s low of 191.81, Friday’s close of 192.85 and then of course the major resistance at 195. 
SPY weekly open interest: Similar to the quarterly, this shows a bullish bias with put support at 190 and 192. The current best pin is 195. Keep in mind this has a high likelihood of changing throughout the week and is important to check the changes if relying on the open interest as an asset. 
As mentioned above, 195 is very strong technical resistance. Anything above 195 can create a large squeeze of shorts with targets at 197, 200 and then 202 (the latter of which coincides with the high from FOMC, near the 50-day, and where the highest calls are for next week).
Sassy’s helpful tidbit: It would be wise to watch the financials, transportation index, as well as the biotech’s next week. The financials showed relative strength on the back of Yellen’s outlook of an interest rate rise this year. They currently make up 16.5% of the SPX. Any continued strength will likely help the overall market. Having said that, Friday was an instance where financial strength wasn’t enough – likely due to the biotech flush. Thus, assuming biotech’s bounce or can at least stabilize, strong financials and transports will coincide with the other evidence presented above that suggests a potential bounce.
Finally, on overall market strength there are some select beauty set-ups in the financial (particularly some of the exchanges) and transpiration sectors. On weakness, when looking for shorts, I’m pretty sure you got it covered. As mentioned above, I present a rough guide here because it’s impossible to be specific without seeing the real-time action. For timely analysis, set-ups, and real time trades come join us. Option trades thrive during volatile markets.
One Last Hurrah or Sayonara?
Last week here I was more biased to the upside as long as SPY stayed above 195. Well it failed to stay above there and I tweeted an updated open interest that looked much less bullish, suggesting that 190 would be the next support. Buying a little ahead of that on Thursday proved to be a very nice winner. Note that we bought a little ahead of 190 because of other indicators I look at throughout the day, not solely because of the open interest. I try to give a rough guide in these posts to help direct your week, but for those looking for real time guidance consider joining us.
Overall, I am in the camp that this correction is not over; however, I am slightly more biased to the idea that we bounce first before resuming the correction. Next week is the quarter end and below I post the open interest for both SPY quarterly and weekly. Note that I do not have much data on how well quarterly open interest works, but I share it for those interested and because I believe is always helpful as an asset to other indicators.
Oversold/Overbought: As a reminder I use these to help determine potential turning points and as an exercise to see where the market is regarding an overbought or oversold cycle. The longer term indicators are all basing at what is typical oversold levels that have led to a bounce since 2013. Failure to bounce has lessoned the affect they have of being oversold and in that context I have included a shorter time frame look as well.
SPX stocks at 20-day lows: This is a bit of a longer term one, but wanted to show it because it finally spiked higher again, which has been a more consistent indicator of a potential immediate bounce. Note it reached its highest level late last week since the drop in August.
SPX stocks above their 10-day MA: At levels that begin the oversold area and where bounces have and can occur, but not yet at an extreme. Note it reached its highest level late last week since the drop in August.
SPX stocks above their 50-day MA: It has remained below 30% since the correction began and thus the immediate nature of being oversold has somewhat worn off for the time being. For future reference, upon any double bottom or lower low in SPX, gauging this for a higher low is very constructive when looking for a bottom.
SPY quarterly open interest: If this is going to have any relevance then 190 should hold till Wednesday’s close when the quarter ends. Anything below 190, there is high odds for a bounce. Failure to stay above 190 however and look for technical support at 187/188 before looking for it at the 185 puts. For upside references at the start of the week, use Friday’s low of 191.81, Friday’s close of 192.85 and then of course the major resistance at 195.
SPY weekly open interest: Similar to the quarterly, this shows a bullish bias with put support at 190 and 192. The current best pin is 195. Keep in mind this has a high likelihood of changing throughout the week and is important to check the changes if relying on the open interest as an asset.
As mentioned above, 195 is very strong technical resistance. Anything above 195 can create a large squeeze of shorts with targets at 197, 200 and then 202 (the latter of which coincides with the high from FOMC, near the 50-day, and where the highest calls are for next week).
Sassy’s helpful tidbit: It would be wise to watch the financials, transportation index, as well as the biotech’s next week. The financials showed relative strength on the back of Yellen’s outlook of an interest rate rise this year. They currently make up 16.5% of the SPX. Any continued strength will likely help the overall market. Having said that, Friday was an instance where financial strength wasn’t enough – likely due to the biotech flush. Thus, assuming biotech’s bounce or can at least stabilize, strong financials and transports will coincide with the other evidence presented above that suggests a potential bounce.
Finally, on overall market strength there are some select beauty set-ups in the financial (particularly some of the exchanges) and transpiration sectors. On weakness, when looking for shorts, I’m pretty sure you got it covered. As mentioned above, I present a rough guide here because it’s impossible to be specific without seeing the real-time action. For timely analysis, set-ups, and real time trades come join us. Option trades thrive during volatile markets.
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