Last week here I went over the 2011 period, not as an analogue, but to demonstrate an outcome other than the V-bottoms we have become accustomed to. If you haven’t read it, I recommend that you take a look as there are many similarities between the 2011 correction and this current one. Again I don’t advocate using it as an model of what is to come, but it opens your mind to being flexible. It also demonstrates what happened as we put in a bottom and certain signs to look for.
Oversold/Overbought: Typically I show a few charts here, but am skipping them this week in order to save time and enjoy my long weekend. Bottom line, we are still in oversold territory, but as I demonstrated last week, oversold can stay oversold during major corrections. Due to the extremes it’s important to know that massive bounces can and do take place often.
SPY open interest and levels: Those that read me often know that I usually give an overall bullish or bearish bias based on the open interest; however, that strategy has changed during the recent volatility. Although it doesn’t allow me to outline a more specific plan for my readers here, it offers very good levels to play against. Below are the main take-aways.
- Over 193 and there is no call resistance till the 200 strike. However, note there is technical resistance at the 195 and 197 level. If price were to get to 200 next week, it would very likely be the end of the rally and a place to consider shorting.
- Under 193 (without being able to recover that level) and there would likely be some delta hedging that can lead to a quick drop to the 190 area (see here for an explanation on delta hedging and open interest).
- Under 190 (without being able to quickly recover that level) and the next major put support comes in at 185; however note that 187 has good technical support. Under 185 and there may again be a drop through the puts to 183.
- If panic selling continues below 183 note that there is very heavy put support at 180 (however, I narrowed the range on the open interest graph and it is currently not being shown).
Final notes: First, as a trader, embrace this volatility! Second, at the start of the week use the 193 as a pivot point. Also note the open interest often changes during the week, which changes important levels.
The recent volatility is no doubt tricky; however, if you have a strategy and can adapt well there is insane amount of opportunity (especially if you trade options). Above I offer possible scenarios that can serve as actionable, but having an understanding of how the market trades, and breadth is extremely important in execution. Finally, just as with SPY, the open interest on the momentum stocks combined with technical analysis offers huge opportunities. If you are interested in daily analysis of the market, all the major momentum stocks, and real time option trades come join my premium service.
Will Put Holders be Rewarded This Week?
Last week here I went over the 2011 period, not as an analogue, but to demonstrate an outcome other than the V-bottoms we have become accustomed to. If you haven’t read it, I recommend that you take a look as there are many similarities between the 2011 correction and this current one. Again I don’t advocate using it as an model of what is to come, but it opens your mind to being flexible. It also demonstrates what happened as we put in a bottom and certain signs to look for.
Oversold/Overbought: Typically I show a few charts here, but am skipping them this week in order to save time and enjoy my long weekend. Bottom line, we are still in oversold territory, but as I demonstrated last week, oversold can stay oversold during major corrections. Due to the extremes it’s important to know that massive bounces can and do take place often.
SPY open interest and levels: Those that read me often know that I usually give an overall bullish or bearish bias based on the open interest; however, that strategy has changed during the recent volatility. Although it doesn’t allow me to outline a more specific plan for my readers here, it offers very good levels to play against. Below are the main take-aways.
Final notes: First, as a trader, embrace this volatility! Second, at the start of the week use the 193 as a pivot point. Also note the open interest often changes during the week, which changes important levels.
The recent volatility is no doubt tricky; however, if you have a strategy and can adapt well there is insane amount of opportunity (especially if you trade options). Above I offer possible scenarios that can serve as actionable, but having an understanding of how the market trades, and breadth is extremely important in execution. Finally, just as with SPY, the open interest on the momentum stocks combined with technical analysis offers huge opportunities. If you are interested in daily analysis of the market, all the major momentum stocks, and real time option trades come join my premium service.
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