Well, that was quite a week, wasn't it??
Now that we have an intermediate top in, I have the short term and intermediate term market view update together with SPY OPX (Option Expiration) pin play (yes, OPX is coming up in two weeks!!) today.
(My charting software is not working at the moment, so please bear with me with the TOS charts).
SPY Daily Update
There are many discussions as to whether the Thursday's lows were legitimate or not, and my take on this is YES, they are the legitimate lows and therefore, the market is coming to retest those lows.
Under the normal circumstances, when there is a big wick like Thursday, the market typically comes to retest the end of the wick, which is 105 in this case. SPX's wick only goes down to 1066 so I will be watching that level as well.
Now, if you are interested in taking advantage of this downside move, here is one of SPY 110/105 spread examples for you.
If you take a look at SPY May Open Interests (OI), you can see many OI at 115, 110, and 105 levels. My take is that SPY would come to retest 105 toward the end of this week, then move up to 110 toward OPX (and possibly expire right around 108.50. I have seen many times when SPX settles right at 1100 level whereas SPY settles at a much lower price. If you are planning to do a pin play, you might like to consider 108 as a possible pin).
(On a side note – I use the option OI as one of my indicators just like MACD, Stoch, Moving average, etc. When the market rallied to form the right shoulder last Monday (wow, it feels like a loooooong time ago!), I was contemplating whether to close out my shorts or not….. and when I looked at the option open interests, it looked very bearish, so I decided to hold on to my shorts. It saved me from taking the wrong side of the trade many times before).
Once SPY comes to retest 105 and gets a price rejection, you might like to flip your position to the long side to take advantage of the rally toward OPX.
Intermediate Market View
In my "Jumping the Creek" March 6 post, I laid out the possible market path for INDU as follows as a resolution to the "Three Peaks and Domed House" pattern. I'm still looking at this as a potential path for the coming months.
SPX Monthly Gartley Pattern
Every time when I see 61.8% retracement, I always think about the Gartley Pattern. As both INDU and SPX retraced to 61.8%, I would consider the Gartley as a very possible pattern to be forming for the coming months.
VIX Monthly
VIX 60 looks like a very good target for this down leg.
Happy Mother's Day, everybody!
