Today SPX has broken out of the falling wedge on a closing basis. Coupled with massive bullish divergence on RSI.
Tomorrow's close will be key - I am hoping we don't give back today's move and paint a (bullish) fakeout.
Downwards momentum has been slowling lately with price action tightening to form a falling wedge over the last 2.5 months down, and volume decreasing.
VIX has broken down out of the mirror image of the S&P500 price action (ascending wedge) and VIX is down just over 10% today. The recent VIX highs have also formed an inverse H&S (again on daily closing basis).
All of this is coupled with continued bearish sentiment (which is not strange given we're in a bear market...) - between FED rate hike fears (which finally materialized at today's FOMC - 25bps rate hike - arguably now removing an element of uncertainty from the markets) and the situation in Ukraine, people have been hedging heavily the last few weeks.
However I am of the opinion this will reverse in the coming days and I believe it is finally time for puts to get punished.
This friday is a quad witching OpEx day with a far greater number of puts than calls expiring EOW - some sources such as spotgamma stating as much as 40% of current puts are expiring this Friday.
$3.3tln of option notional, including over $2tln of SPX-linked options, expires on Friday 18th March (GS).
I'm looking for a 0.5 - 0.618 fib level retrace of the entire move down from ATH:
Tomorrow's close will be key - I am hoping we don't give back today's move and paint a (bullish) fakeout.
Downwards momentum has been slowling lately with price action tightening to form a falling wedge over the last 2.5 months down, and volume decreasing.
VIX has broken down out of the mirror image of the S&P500 price action (ascending wedge) and VIX is down just over 10% today. The recent VIX highs have also formed an inverse H&S (again on daily closing basis).
All of this is coupled with continued bearish sentiment (which is not strange given we're in a bear market...) - between FED rate hike fears (which finally materialized at today's FOMC - 25bps rate hike - arguably now removing an element of uncertainty from the markets) and the situation in Ukraine, people have been hedging heavily the last few weeks.
However I am of the opinion this will reverse in the coming days and I believe it is finally time for puts to get punished.
This friday is a quad witching OpEx day with a far greater number of puts than calls expiring EOW - some sources such as spotgamma stating as much as 40% of current puts are expiring this Friday.
$3.3tln of option notional, including over $2tln of SPX-linked options, expires on Friday 18th March (GS).
I'm looking for a 0.5 - 0.618 fib level retrace of the entire move down from ATH:
- TP1 - 4462.2
- TP2 - 4546.6
Comment:
Zooming in to 4hr TF megaphone - at wick last resistance
Comment:
TP1 (4462.2) hit
VIX possible support approaching - one to be mindful of this coming week...
VIX possible support approaching - one to be mindful of this coming week...
Trade closed: target reached:
TP2 (4546.6) hit
Today VIX closed below February lows however SPX is not quite above Feb high yet (although getting very close). That VIX trendline highlighted previously did not hold. Lot's of short covering since the quarterly options expiration on the 18th March highlighted in original idea...
SPX daily actually closed above 0.618 fib - need to give it a day or 2 to determine whether the bull is real or if it's a fake out.
If there is more juice still (starting to wonder) - perhaps a retest of the longer term trend lines is coming
Today VIX closed below February lows however SPX is not quite above Feb high yet (although getting very close). That VIX trendline highlighted previously did not hold. Lot's of short covering since the quarterly options expiration on the 18th March highlighted in original idea...
SPX daily actually closed above 0.618 fib - need to give it a day or 2 to determine whether the bull is real or if it's a fake out.
If there is more juice still (starting to wonder) - perhaps a retest of the longer term trend lines is coming
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