Last week here I showed the enormous amount of puts from 193 and below. I discussed how that is typically a bullish sign, but hard to trust in the recent environment. Then on Tuesday morning I tweeted an update that showed a bunch of calls from 200 on. In the end SPY pinned in between them and right at the spot where the least amount of put or call owners get paid. So maybe all is right again in the world? 🙂
Then again the volatility is still high and the big FOMC decision is next week.
Oversold/Overbought: I typically gauge these measures to determine turning points. The last few weeks have proven that oversold can stay oversold and then even more oversold. Bottom line though is we have yet to really correct some of the oversold conditions and combined with next weeks open interest, I am more inclined to think the market bounces pretty hard.
SPX stocks at 20-day highs: Still at the bottom of the barrel and at levels that often lead to a major bounce.
SPX stocks at 20-day lows: This is also very low, suggesting most stocks are off their lows (even though they haven’t reclaimed highs yet). Not surprising.
SPX stocks above their 50-day MA: This is also still in the dumpster where it has remained for weeks and where a bounce is likely imminent. 
SPY open interest: Next week is monthly OPEX and the open interest doesn’t change as much during the week as weeklies. It also pins at a location that does not reward put and call holders almost every time. Having said that, last month was one of those rare times that the high strikes on the put side got rewarded. It would be very surprising to see that happen twice in a row, but knowing the VIX is still high and the FOMC decision is next week, it is would be remiss to dismiss the possibility.
On the surface this open interest is bullish. SPY closed above the high strike 195 puts and assuming it opens above there, it becomes support. Any dip to 195 is a good buy area. Above there and 200 is very likely to be tested. Above 200 and it’s possible SPY hits, 202, 204, or even 205 where there is currently an even number of calls and puts.
However, if price should fall below 194.25 (last weeks low) then I would begin to change my bullish bias. Last week every trading day touched the 194/195 area so if that support can’t hold, their is a likelihood of a drop to the 190/191 area.
One thing to note is that VIX expires on Wednesday morning and the open interest suggests that the VIX will stay elevated at the start of the week. Currently a close of 20 would make the most sense. It’s still possible for the market to rally with an elevated VIX, especially considering the risk going into Thursday’s rate decision, but should it be curtailed early on, then a strong rally could come Wednesday. On the other hand, should the market drop early in the week, it would likely bounce late Tuesday into Wednesday since VIX will likely expire below 25. 
Finally, besides the possible fireworks after Thursday’s rate decision, there will likely be some erratic movement late Friday due to quadruple witching and SPX rebalancing.
For those looking for more: I come to you with excellent daily guidance, analysis, and an overall sassy time – including real time option trades – so come join my service.
Quad Witching, S&P Roll Over, & FOMC Oh My!
Then again the volatility is still high and the big FOMC decision is next week.
Oversold/Overbought: I typically gauge these measures to determine turning points. The last few weeks have proven that oversold can stay oversold and then even more oversold. Bottom line though is we have yet to really correct some of the oversold conditions and combined with next weeks open interest, I am more inclined to think the market bounces pretty hard.
SPX stocks at 20-day highs: Still at the bottom of the barrel and at levels that often lead to a major bounce.
SPX stocks at 20-day lows: This is also very low, suggesting most stocks are off their lows (even though they haven’t reclaimed highs yet). Not surprising.
SPX stocks above their 50-day MA: This is also still in the dumpster where it has remained for weeks and where a bounce is likely imminent.
SPY open interest: Next week is monthly OPEX and the open interest doesn’t change as much during the week as weeklies. It also pins at a location that does not reward put and call holders almost every time. Having said that, last month was one of those rare times that the high strikes on the put side got rewarded. It would be very surprising to see that happen twice in a row, but knowing the VIX is still high and the FOMC decision is next week, it is would be remiss to dismiss the possibility.
On the surface this open interest is bullish. SPY closed above the high strike 195 puts and assuming it opens above there, it becomes support. Any dip to 195 is a good buy area. Above there and 200 is very likely to be tested. Above 200 and it’s possible SPY hits, 202, 204, or even 205 where there is currently an even number of calls and puts.
However, if price should fall below 194.25 (last weeks low) then I would begin to change my bullish bias. Last week every trading day touched the 194/195 area so if that support can’t hold, their is a likelihood of a drop to the 190/191 area.
One thing to note is that VIX expires on Wednesday morning and the open interest suggests that the VIX will stay elevated at the start of the week. Currently a close of 20 would make the most sense. It’s still possible for the market to rally with an elevated VIX, especially considering the risk going into Thursday’s rate decision, but should it be curtailed early on, then a strong rally could come Wednesday. On the other hand, should the market drop early in the week, it would likely bounce late Tuesday into Wednesday since VIX will likely expire below 25.
Finally, besides the possible fireworks after Thursday’s rate decision, there will likely be some erratic movement late Friday due to quadruple witching and SPX rebalancing.
For those looking for more: I come to you with excellent daily guidance, analysis, and an overall sassy time – including real time option trades – so come join my service.
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