Posts tagged option expiration
It’s Hard To Kill A Bull…
May 3rd
Well, it seems that small bounce up wasn’t good enough for the bulls, as they rallied back well above 50% of Friday’s sell off. Those bulls are pesky and irritating creatures… to say the least. But, I knew that it was possible that they’d rally it back up, as the charts were showing that the market was oversold on a short term basis.
However, today they ended overbought. So, I do believe we will sell off some tomorrow. I’m not looking for anything major, as I think everyone is waiting on the job’s reports on this Friday. That should be a big market mover. Of course between now and then, any news out of Greece or some other event, could spook the market first… and let the selling begin.
One thing of interest today, on both the 60 minute and the 15 minute charts, was how the market couldn’t get above this downward sloping trendline. It is clearly putting pressure on it, and if the market wants to go above it, then a gap open over top of the trendline, is going to be required.
It’s the same trendline shown in this chart below (found on Cobra’s blog). Problem is, there is also a lower trendline that is supporting the market, and preventing further selling. This is looking like a symmetrical triangle (credit goes to Cobra for spotting it, as I didn’t), which still has another day or 2 of room to trade in, before it reaches the apex, and must jump out.
All the other charts are still signaling that the market will pull back, but unless we get some bad news event to cause the selling, we are waiting for Friday to produce it… and that’s only if the jobs data is bad. You know how the government likes to erase some of the digits on the report. It’s just like giving the report card of the students grades, to the student first, and telling him to give it to his parents. Funny how easy it is to turn those “F’s” into “A’s”… So as much as I’d like to tell you that all the charts are pointing down, the chart above could go either way.
We are also now 3 weeks away from this months’ option expiration, and although the market sentiment is still extremely bullish, the amount of puts purchased versus calls, for the month of May, is way too heavy on the put side.
That doesn’t mean we can’t sell off this week, and rally back hard into opx, but the chance of the market crashing into opx is very slim. Those market makers are not going to pay out on all those puts. I’ve seen it too many times, how they sell tons of puts to the retail trader, and then rally the market, making them expire worthless.
Of course after opx is another story, but for now, the bears have really only got this week too get a sell off to happen. The week of opx, and most of the week prior to opx is already reserved for the bulls I’m afraid…
Red
Going Down…
Apr 27th
What a beautiful day it was in the stock market, as reality finally slaps some sense into it. When bulls finally run out crack, they sure do come down hard! It was certainly long overdue, I’m I glad to see it happen. It gives us option traders the volatility that we need to make some decent money trading them.
Not that it can’t be done in a up market, but it’s harder to do as the time decay kills you, due to the market moving up so slowly. The down moves are fast and furious, but don’t last long enough to make me happy.
Anyway, I’m looking for a small bounce tomorrow to get short again, as I closed out my put spread today around the first low of the day. I missed out on a little more money, as it continued lower into the close. But, nothing goes straight down… because “Down” is a bad word in the stock market, and “UP” is all that’s allowed to move continuously without dipping. (Not really, but it’s sure seems like that).
Moving on…
Let’s just focus on the key support levels for now, so we know about when to bail out on our short positions. Tomorrow is tough day to call. The best thing to expect is a “pause” day, meaning that after a large sell off, there is usually a day that the market goes sideways, to slightly up or down. That’s what I expect for tomorrow, but it’s not a guarantee as it could continue selling hard. (The futures are about flat now, so that tells me a bounce is more likely).
Assuming there is a bounce tomorrow, I plan to use it to take another position on the short side, as I don’t trust any long trades at this time. That’s because I don’t think we have sold off far enough to get a several day bounce in the market yet. (Day trading is different of course, but I only swing trade).
So, the support levels going down are at 117.50 spy (horizontal support line), 116.25 (50 dma), and 115.00 (horizontal support line). I expect the several day bounce to come in at either 116.25 or 115.00 level. If we make it down to that 115.00 (1115 spx) level, I would expect a decent bounce.
But, we might stop on the 50 dma around 116.25 currently. We just have too take it one level at a time for now. Let’s not forget the fake print of 107.38 spy from last month, and the DOW 10,000 fake print Sundancer caught too, as that might be our final target, before a summer rally?
However, I don’t know if we are headed down to that area first, and then a rally into the May option expiration, or a rally into opx from a higher level (then the fake prints), and then a sell off to the fake print areas after opx is over.
Time will tell I guess…
Red
