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Tuesday, February 20, 2018

Daily update 2/20 SPY options

The bears outlasted the dip buyers.

The gap down below the 50 SMA was met with some dip buyers.  However, a mid day rally above the 50 was met with sellers and they won the afternoon.  Breadth was -64%.  New highs were 64 and new lows were 45.  There is clear resistance between the 20 and 50 SMAs.

The futures closed above the 50 SMA, but did not confirm a break.  They ended the day back below it.  The low today was just above the 200 SMA.  We are caught between resistance and support now.  Until the 50 or 200 is broken we are likely to see a choppy trade.

The green count turned down from below 50.  The bulls still have work to do to get control back.

The latest SPY option data shows a lot of calls and puts at 275.  Above 275.5 delta hedging could accelerate prices higher.  Further upside could see more hedging above 277.5 and 280.5.  On the flip side there are a lot of puts at the 270 strike.  Below 269.5 delta hedging could accelerate prices to the down side.  Further hedging below 264.5 and 261.5.  Note the 270 strike is not very far below current prices.  The bulls don't have a lot of room to work with to hold the market up.

The market found resistance for a second day.  Is it insurmountable?  It could be.  It might not take all that much more downside to start another cascade lower to retest the recent low.  There seems to be a consensus among money managers and traders on CNBC the recent low will be retested.  I am not seeing anything at the moment that suggests otherwise.  The bulls need another shot of momentum and clear the 20 DMA. 


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