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Friday, March 23, 2018

Daily update 3/23 SPY option data


SPX touched its 200 SMA.  Breadth was -77%.  New highs were 16.  New lows were 206.  Test of Feb. low in progress

The futures are in the area of congestion around the Feb. low.  They briefly penetrated the line marking the lowest close of any bar this year. 

Oversold got oversolder.

SPY broke down through the 261 and 260 high put option strikes causing more delta hedging.  That is probably what caused the down move to speed up.  I guess it is not a good thing to have a high number of options at adjacent strikes.  The next support/acceleration points are 255 and 250.  I suppose this could work in reverse as well.  If SPY gets back up through 260.5 or so they would probably pull the hedges back off which could send SPY up through 261 enough to cause the same action there.  Keep that in mind because that will hold true until the April expiration. 

The high TRIN brought out a few buyers this morning, but the sellers took over late in the day.  When we were here in Feb. there was no panic.  All anybody wanted to talk about was how good the fundamentals were.  Many thought the low would be retested.  Well here we are.  Now the majority of talk is trade war.  Occasionally somebody mentions earnings are good.  Having some fear at a bottom is a good thing.  However, you have to have the selling tied to the fear exhausted.  I can't say we have that yet.  Back in Feb. everybody was salivating at buying a retest of the low.  Maybe they still are.  On the other hand, we have that double top lower high pattern that often breaks the low of the initial sell off.  I don't know how to handicap this.  Most of the time the Feb. intraday low is exceeded.  If the market bounces back the bulls pile in.  If it doesn't bounce back then all heck breaks loose.  Sometimes the market bounces before the low is exceeded.  Those are tricky.  The bounce can turn into a bottom or roll over and break the low and keep going.  Any bounce that starts before that low is exceeded is suspect.  We will need to let the market prove itself before piling in on the long side.   

Have a great weekend.


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