Up in the morning, down hard midday, and back up into the close! Wow, what a wild day it was...
(to watch on youtube, go to: http://www.youtube.com/watch?v=Kyj-SN4g7fU)
The market didn't play out exactly as I expected it to, but then again... it rarely does! I expected it to roll over in the morning and sell off most of the day, and then rally back some on Friday... but it fooled me. I guess "overbought" isn't the same as "extremely overbought", so the market rallied up in the morning hard... really stretching all the short term charts into very overbought territory.
Then about midday they finally rolled over and sold off fairly quick. They went down to almost the 117.20 spy FP level, and then reversed back up into the close. At the end of the day, all the short term charts started to turn back up from their oversold conditions.
This means tomorrow is very likely to rally up in the morning, as the charts are now supporting a move up, and they have another POMO day tomorrow too. Plus it's a Friday and an option expiration day too. I believe it's the weekly's expiring this time.
That means they should rally up to pin the spy at a level that they have too pay out the least amount of option holders. It's usually the "puts" that get squeezed hard on opx day, but not always. Sometimes they push it down so they don't have too pay out the call holders.
However, tomorrow could go either way? In the latest Mr. Topstep video, his guest speaker George Cavaligos quoted that "open interest has dropped as the market has rallied the last 2 days", which means that it doesn't need to be propped up as the market makers don't have to worry about pinning the levels because there aren't to many option holders left to pay out on.
This means that they could just allow the charts to play out naturally tomorrow when they finally get overbought around midday as the POMO money will be used up by then, as well as the charts themselves will have worked themselves into overbought territory again.
That doesn't mean that they will let them drop into the close of course, it only means that they don't have any real reason to manipulate the market higher (or hold at the high) because they aren't at risk of losing any money on the small amount of puts left in the market.
But, the government doesn't usually like to let the market drop on Friday as they want people to go out and spend money over the weekend... which a huge sell off on any Friday would make people think twice about spending money on their time off from work. It's a game the gangsters play to trick the public into thinking that everything is OK (keep your eye on the carrot here in my right hand, while I pick your pocket with my left hand).
Anyway, I'm looking for a move up in the morning as the charts are now pointing back up again. About noon or so, I'd estimate that they will get very overbought again, are could rollover into the close. I say "could", because there won't be any more POMO money left to support the market the rest of the day, and there won't be any reason for the market makers to hold it up either.
So, it's free to fall simply based on the charts being overbought again. But will it? I don't know? We'll have too wait and see I guess. However, if it goes up all day and gets really overbought again, it could set Monday up as a big down day. Not that I'm calling for one, or believe it will happen, as most Monday's are "Bullish Monday's"... but the charts could be aligned that way by the close tomorrow.
For now though, let's just wait and see. I'm calling for up in the morning, and it stalling around midday. At that point it could be held there until the close, or roll back down and sell off in it... probably closing lower then the opening level if the momentum really kicks in.