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Monday, November 5, 2018

Daily update 11/5 SPY option data

SPX was up, but not QQQ.

The market gapped up a bit, but found sellers early on.  A lot of selling in tech land.  That eventually bled over into small cap stocks.  SPX held up pretty well all day though.  Breadth was +62%.  New highs came in at 30.  New lows dropped to 50.  Around 2:30 PM a buy program kicked in which pushed SPX up.  It settled back some, but held much of the gain into the close. 

The futures traded sideways much of the day.  The afternoon buy program pushed them above the 50 SMA.  No confirmation of a break yet.

The green count is well into overbought territory.  I am curious how much upside is left.

The market has rallied into the election as is normal.  Election day itself is normally slightly positive as well.  After that is where things get cloudy.  The reaction the day after does not always set direction for the next several days or weeks.  SPX is still below the 200 DMA and tech selling keeps on happening from time to time.  Defensive issues were the hit of the parade today.  That is not a particularly good sign.  We will just have to see how much further the bulls decide to push things.

The option data has changed considerably since the last report on 10/26.  Here is that chart.

Here is the latest data.

The number of puts at the 265 strike is greatly reduced.  The 270 strike saw an increase in puts.  The 275 strike saw a modest reduction in puts and a significant increase in calls.  The 280 strike also saw an increase in calls.  The 280 calls would probably provide some resistance if SPY were to get up there.  There should be support at 270 from the puts.  In between 270 and 280 I don't this data tells us much.

Tomorrow is election day.  As it was in 2016 the polls are predicting the democrats will do well.  My guess is the polls will be wrong on that just like they were in 2016.  I have not seen anything about changes in methodology whatsoever.  I don't think most polls can be trusted.  My guess is the republicans will retain control of the house.  Whether that would be good for the market is another question.  A good showing by republicans will strengthen Trump's resolve in the trade war with China.  He will be even less likely to back down.  Unless China changes their position the tariffs will go up next year.  That would likely be a problem for the global economy.  A democrat win in the house will strengthen China's resolve.  I believe China did not want to negotiate anything before the election because they read the press and believe democrats will win.  I am not sure about Trump's resolve if democrats win.  He is not a coward as most of our politicians have been in my lifetime.  He might keep on pushing anyway.  I believe what happens with China will be a major driving force for months in stocks.


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.