Morning preview 2016/12/22

This is the review for the second half of this week. Yes, we hate Wednesday expirations!

From this OI chart, I would say most of the big positions were closed, therefore we should expect quiet expiration this Friday. The only exception would be SPY 225C which is net long.

The daily chart of 225C shows the current price is just above VWAP, so we can expect profit taking above this area. The consolidation continues, I guess.

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Is the market at the top?

The market has been ripping after Hillary lost her ego.

But there is a sign of the top. I am paying attention to the ratio of S&P500($SPX) to UST30Y price ($USB). Let's take a look at the weekly chart.

$USB:$SPX Weekly

The ratio is currently 0.066. Those horizontal lines are standard deviations and the green is 1σ and the pink is 2σ, respectively. You can see how the current ratio, 0.066, is unusual level. I also examined the $USB:$SPX ratio by downloading them from StockCharts.com and found that there were only 25weeks that this ratio was less than 0.066.  Those weeks are as follows:

• 1999/11/15
• 1999/11/22
• 1999/11/29
• 1999/12/06
• 1999/12/13
• 1999/12/20
• 1999/12/27
• 2000/01/03
• 2000/01/10
• 2000/01/18
• 2000/01/31
• 2000/03/13
• 2000/03/20
• 2000/03/27
• 2000/04/03
• 2000/04/24
• 2000/05/01
• 2000/05/08
• 2000/05/15
• 2000/05/30
• 2000/06/19
• 2000/07/03
• 2000/07/10
• 2000/08/28
• 2016/12/12

You can see almost all of them happened between 1999 and 2000 when Pets.com were listed on NASDAQ.

Anyways, it's only 25weeks out of 2034 weeks that $USB:$SPX was less than current level. If this ratio reverts to the mean, and I believe so, there would be at least two scenarios.

A: Stocks are sold and bonds are bought.
B: Stocks keep getting bought and bonds are bought as well.

The scenario A is called pullback or collection, depending the deepness of the sell-off. I believe many of market participants are expecting this course.

The second scenario is called.... I don't know, but I've seen this picture before when I lived in Japan back in late 80's. I remember everything was bought....stocks, JGB, and Yen.

This is monthly chart of Nikkei back in 1980's. You will see that how the market could stay overbought by those over 70 RSIs.

I'm not saying this happens in US following years, but I would like to say "don't underestimate the power of excess liquidity".

Morning preview 2016/12/19

Good morning.

On SPY's Value Based Open Interest chart, I would like to point out two positions, 221 C (Long) and 230 P (Short).

Let's see the 221C on Daily Chart. Most of the Longs are bought on December 8th, and that buyers were still in profit last Friday, but the margin is narrowing. We could expect this Call holder would close the position by Wednesday.

On the other hand, 230P was sold to open on December 14th, the Put price has not decreased so much. If SPY price can not rise, the seller might start closing this position.

Overall SPY seems to be heavy until Wednesday.

OptionM 8 new version

OptionM8 new version

We released a new version of OptionM8. 

• Android version
• IOS version 

In this version, we made it possible to display value-based OI. We also made it possible to display VWAP (volume load moving average) on option price chart(daily, 60 minutes, 5 minutes and 1 minute). These functions are unique to OptionM8.

Based on the value-based OI, you can estimate whether a certain strike is Net Long or Net Short, and how much their positions are.

Also, by looking at the VWAP of the daily options chart, you can see how much profits/loss are on the long side or short side.

If a net-short strike enters ITM, those sellers would be in red and they are likely to buy back those  options. In other words, the probability of option price rise increases.

Tap Open Interest from the lower screen menu
Select Ticker and Expiry from the top right menu 
→ Open Interest charts are displayed 

The Value-based OI is in the 3rd row.
Calls are green and Puts are red.
You can see 221.5 Call and 222 Call are net short

Select Daily Chart from the bottom menu
Then select Ticker, Expiry, Call/Put, and Strike Price from the top-right menu
→ The Daily charts are displayed

The second row is the Call's daily chart
The red line is Bid-based VWAP and the red line is Ask-based VWAP
As you can see, Calls are way above the VWAP and shorts are in loss,
therefore you could expect those calls are "buy" in the intraday dip.

Conversely if the net long Strike is in OTM and those longs are in red, they have a high probability of "sell the blip" somewhere near VWAP. If it is Call, that strike price would be a strong resistance of stock price, and if it is Put, that strike price would work as strong support of stock price.

Select OI from the bottom menu then select Ticker and Expiry
from the upper menu of the screen to display OI charts

The 3rd row is the value-based OI chart.
You can see that 219 Put is significantly long.

Let's see how the 210 Put is working...

As you can see, that 219 Put is below VWAP and longs are in loss.
If SPY drops to 219 level, you could expect strong "buy" opportunity.

The pricing OptionM8 is as follows:

• Guest users can display OI charts, daily charts, and intraday charts for SPY only one expiration and one strike. Guest users would see advertisements.
• Guest users can upgrade to Free tier by logging in though Twitter. Free tier users can display OI charts, daily charts, and intraday charts for SPY, QQQ, and IWM with next two expirations and three strikes. Advertisements would be displayed.
• Free tier users can upgrade to Basic tier by subscription. The price is $49.99/month. Basic users can display those charts with more expirations and strikes.

2016/06/27 SPY Options Wrap Up

Outlook

The market is digesting the impact of BRexit. In Japan, some critics are saying BRexit is much worse than 2007 financial crisis. I think BRexit is not that bad, but cheaper £ definitely gives US companies less sales from UK region.

At this moment, nobody knows how big BRexit's impact is, therefore we should ask to the market that can magically guess anything.

Right now, S&P500 is oversold in short term so we can expect some rebound here, however, under this uncertain situation, we can't expect enough buyers show up therefore "Sell the blip" would be the right tactics, and SPY 203 level would lure those sellers.

SPY today

SPY 5m

SPY gapped down again and it showed beautiful positive divergence and suggests short term bottoming. The problem is similar positive divergence was observed last Friday. 

SPY 1h

Above is SPY 1hour chart and it shows us how steep this decline was. Those indicators such as RSI or PPO suggest very short term bottoms is in. The upper side of Raff Channel is coincidentally same level as 0.382 fib and it's reasonable target for near term rebound. If SPY can't get buyers at this level, 203, sellers will show up.

$NYAD

$NYHL

SPY:RSP

$SPX CVI

$SPX STVO

$SPX VTO

CVI is -2σ and suggests near term rebound. 

SPY OI 06/30

SPY OI 07/01

SPY OI 07/08

SPY DWV 06/30

SPY DWV 07/01

SPY DWV 07/08

There are two expirations this week and 06/30 had lots of Put selling today while 07/01 had Put buying. There are still ITM puts for 06/30 and we can expect delta hedge selling if SPY can't recover 205 level by Wednesday.

Extra: S&P500 components

Long watch list...DPS

DPS

Short watch list...SPLS and ZION

SPLS

ZION

2016/06/20 SPY Options Wrap Up

Outlook

We expect SPY's new high this week. I don't know the result of BRexit vote yet, but we already know the market went too bearish past weeks.

SPY today

SPY 5m

SPY opened with big gap up, but it couldn't hold that level and puked out 0.382 of gain from Thursday low. It might have been a buy at the close today.

$NYAD

$NYHL

SPY:RSP

$SPX CVI

$SPX STVO

$SPX VTO

• CVIは大幅反発。超短期な買われすぎまではまだ余裕あり。
• STVOは続伸。STVOがプラ転すれば短期的モーメンタムは上に。
• VTOはプラス圏で反発。中期的なモーメンタムも上に。
  
  →BRexitというイベントはありますが、S&P500は最高値更新の準備が整いました。

CVI surged today but it still has a room for short-term overbought. STVO is about to turn positive. VTO rebounded at positive level. Those indicators suggests new ATH is right at the corner.

SPY OI 06/24

SPY DWV 06/24

From OI charts, we can read SPY is at the max pain level right now.

Extra: SPY long watch list

AFL, MRO, QRVO, ACN, EMR and LRCX for tomorrow.

2016/06/17 SPY Options Wrap Up

Outlook

I'm not a politic expert and I don't even care if Brits divorce from EU. It is important, however, to predict how the market reacts against the news, and this is where technical analysis is important. IMO, the market is ready to accept the result of Brexit with welcome tone. Yes, I'm bullish here.

SPY today

SPY 5m

SPY has been rejected at 5SMA level this week, but it had higher low on Friday with positive divergence.

SPY 60m

This is 1h chart of SPY and it shows more evidences that SPY might have bottomed on Thursday at 0.618 fib level. PPO and RSI show clear positive divergence. The spike of OBV suggests somebody bought big on Thursday.

$NYAD

$NYHL

SPY:RSP

$NYAD and $NYHL show positive divergence against S&P500.

$VXV:$VIX

The ratio of $VXV:$VIX is still flat but its PPO suggests the low was in, which is bullish for stocks.

$SPX CVI

$SPX STVO

$SPX VTO

STVO and VTO are conflicting so I think it's not a good idea to go long big at here, but the short term  trend is clearly up.

SPY OI 06/24

SPY OI 06/30

SPY DWV 06/24

SPY DWV 06/30

The coming expiration is skewed to put side, which is bullish.

Extra: Watch list for S&P500 composits

GGP
KIM
MJN
SPG
MAC
AEP
GIS
HCN
AES
EQT
MNST
UPS
XOM
Those are expected to continue up trend.