Last week here I stated that the edge continued to remain with the bulls, but that I expected a slow and rangebound week. Obviously, I was wrong in that I didn’t see the range breaking to the downside; however, minus the drop on Tuesday, the rest of the week was definitely slow and rangebound. I also stated that based on Friday’s open interest, price falling below 237 would likely be bought; however, that tune changed dramatically when I updated the open interest (you can see that tweet here). With the longer term trend bullish and this most recent slight pullback, read on to see what breadth and the current open interest currently suggests in the short term (I use the word ‘currently’ because as we saw last week the OI does sometimes drastically change mid-week).
Although in last weeks public post I didn’t anticipate a break of the SPY range, I was anticipating some downside in individual stocks. For those that trade individual momentum stocks (AAPL, GOOGL, AMZN, NFLX, TSLA etc) below was the intro to the Open Interest and Strategy post that I now offer weekly for a one time fee and is separate from my more inclusive full premium service.
Open Interest: A quick note about the momo stocks below. At the moment most of their open interest suggests that that they will be pausing or pulling back next week. I actually hope that is the case because earning season begins in about a month. If they begin to pullback they offer 1) opportunities to buy the dip for scalps and 2) opportunities to buy the dip for potential run ups into earnings (maybe not all next week but in the coming weeks I will be keeping my eyes peeled for good levels to get long). Finally, if the week starts off very strong, but internals aren’t confirming then I think we will have some opportunities to buy puts for short term pullbacks in these guys.
Included in that strategy piece was individual stock open interest analysis as well as technical levels and ideas for those stocks. Next weeks Open Interest Strategy Post can be bought here.
Breadth: Below are reasons to expect a bounce soon and things to keep an eye on in the next few weeks.
SPX stocks at 20-day highs: This is oversold. This particular measure can stay oversold for usually a few days to a week, but at this point it is getting close to a bounce if that hasn’t already begun late Friday. 
SPX stocks at 20-day lows: Last week saw the highest amount of 20-day lows since the election. Once it breaks that seal there is likely more to come. It might come after a very large bounce or it might happen much sooner. Either way, we are likely to see more new 20-day lows over the next few weeks.
SPX stocks above their 20-day MA: It is obviously a sign of weakness to see stocks above their 20 day moving average drop to only 30% so swiftly. Seeing as it is almost oversold from a very strong trend, there will likely be a large bounce (possibly to new highs or near old highs) soon. Keep an eye on this measure to see if it makes a lower high with that bounce. If it does then you have more confirmation that the correction is not over despite what price may be saying. 
Open Interest:
SPY-W: (21 of 28 pins since Wednesday expiration inception).* Two weeks ago the Wednesday expiration had its first failed pin to the downside since the election (meaning price closed under the high puts). As I have said before, that is often the start of a trend change. After such a strong bullish trend (as we have seen since the election) price typically doesn’t just crash. Instead, it begins the process of a trend change that could include several large bounces. That is why I wasn’t bearish last week and am still not ready to call for a large correction to imminently begin. The current open interest suggests a pin between 234 and 236. Should price move away from those levels prior to Wednesday then there is very good put support at 231 and call resistance from 237 to 238. 
SPY-F: (16 of 23 pins since I began tracking Friday’s expiration).* The current open interest suggests a pin between 236 and 237, but there is a lot of time and room for this to change during the week. There is put support that begins at 235, but gets stronger at 232. There is small call resistance at 238, but it’s not yet meaningful. 
In sum: The recent market action is very likely signaling a trend change and the start of a larger correction. Currently, the market is near or already oversold and likely to bounce soon if that has not already begun late Friday. Should price immediately go lower it will become even more oversold and not a place to initiate shorts. The current open interest suggests a potential slow first few days of the week and then possibly a move higher if the puts that begin at 235 continue to remain or even build higher in the open interest.
For much more inclusive analysis all week long consider joining SassyOptions premium. A premium subscription includes morning & intra-day market analysis, individual stock set-ups with their open interest, and real time trade alerts. Alternatively, the individual stock open interest weekly strategy piece can be purchased here.
*Wednesday 3/22: successful pin.
Friday 3/24: successful pin.
Tags: AAPL, AAPL TLT FB, breadth indicators, bullish, day trading, GOOGL, GS, max pain, NFLX, open interest, options, S&P 500, SPX, spy, stock market, trading, TSLA
A Trend Change? What the Open Interest Says for Next Week
Last week here I stated that the edge continued to remain with the bulls, but that I expected a slow and rangebound week. Obviously, I was wrong in that I didn’t see the range breaking to the downside; however, minus the drop on Tuesday, the rest of the week was definitely slow and rangebound. I also stated that based on Friday’s open interest, price falling below 237 would likely be bought; however, that tune changed dramatically when I updated the open interest (you can see that tweet here). With the longer term trend bullish and this most recent slight pullback, read on to see what breadth and the current open interest currently suggests in the short term (I use the word ‘currently’ because as we saw last week the OI does sometimes drastically change mid-week).
Although in last weeks public post I didn’t anticipate a break of the SPY range, I was anticipating some downside in individual stocks. For those that trade individual momentum stocks (AAPL, GOOGL, AMZN, NFLX, TSLA etc) below was the intro to the Open Interest and Strategy post that I now offer weekly for a one time fee and is separate from my more inclusive full premium service.
Open Interest: A quick note about the momo stocks below. At the moment most of their open interest suggests that that they will be pausing or pulling back next week. I actually hope that is the case because earning season begins in about a month. If they begin to pullback they offer 1) opportunities to buy the dip for scalps and 2) opportunities to buy the dip for potential run ups into earnings (maybe not all next week but in the coming weeks I will be keeping my eyes peeled for good levels to get long). Finally, if the week starts off very strong, but internals aren’t confirming then I think we will have some opportunities to buy puts for short term pullbacks in these guys.
Included in that strategy piece was individual stock open interest analysis as well as technical levels and ideas for those stocks. Next weeks Open Interest Strategy Post can be bought here.
Breadth: Below are reasons to expect a bounce soon and things to keep an eye on in the next few weeks.
SPX stocks at 20-day highs: This is oversold. This particular measure can stay oversold for usually a few days to a week, but at this point it is getting close to a bounce if that hasn’t already begun late Friday.
SPX stocks at 20-day lows: Last week saw the highest amount of 20-day lows since the election. Once it breaks that seal there is likely more to come. It might come after a very large bounce or it might happen much sooner. Either way, we are likely to see more new 20-day lows over the next few weeks.
SPX stocks above their 20-day MA: It is obviously a sign of weakness to see stocks above their 20 day moving average drop to only 30% so swiftly. Seeing as it is almost oversold from a very strong trend, there will likely be a large bounce (possibly to new highs or near old highs) soon. Keep an eye on this measure to see if it makes a lower high with that bounce. If it does then you have more confirmation that the correction is not over despite what price may be saying.
Open Interest:
SPY-W: (21 of 28 pins since Wednesday expiration inception).* Two weeks ago the Wednesday expiration had its first failed pin to the downside since the election (meaning price closed under the high puts). As I have said before, that is often the start of a trend change. After such a strong bullish trend (as we have seen since the election) price typically doesn’t just crash. Instead, it begins the process of a trend change that could include several large bounces. That is why I wasn’t bearish last week and am still not ready to call for a large correction to imminently begin. The current open interest suggests a pin between 234 and 236. Should price move away from those levels prior to Wednesday then there is very good put support at 231 and call resistance from 237 to 238.
SPY-F: (16 of 23 pins since I began tracking Friday’s expiration).* The current open interest suggests a pin between 236 and 237, but there is a lot of time and room for this to change during the week. There is put support that begins at 235, but gets stronger at 232. There is small call resistance at 238, but it’s not yet meaningful.
In sum: The recent market action is very likely signaling a trend change and the start of a larger correction. Currently, the market is near or already oversold and likely to bounce soon if that has not already begun late Friday. Should price immediately go lower it will become even more oversold and not a place to initiate shorts. The current open interest suggests a potential slow first few days of the week and then possibly a move higher if the puts that begin at 235 continue to remain or even build higher in the open interest.
For much more inclusive analysis all week long consider joining SassyOptions premium. A premium subscription includes morning & intra-day market analysis, individual stock set-ups with their open interest, and real time trade alerts. Alternatively, the individual stock open interest weekly strategy piece can be purchased here.
*Wednesday 3/22: successful pin.
Friday 3/24: successful pin.
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Tags: AAPL, AAPL TLT FB, breadth indicators, bullish, day trading, GOOGL, GS, max pain, NFLX, open interest, options, S&P 500, SPX, spy, stock market, trading, TSLA