Outlook
Fed may hike the rate in June, but we still believe SPY has hit the bottom. While it is very difficult for SPY to clear 210 by Friday expiration, it would be easy to surpass 5SMA level by Friday.
SPY today
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| SPY 5m |
SPY started with gap down and we thought there would be replay of Monday, however, SPY lost all of the gain after FOMC minute, which suggests rate hike in June.
In my understanding, Fed would raise the interest rate because US economy is improving. It's beyond my understanding why people are selling stocks with improving economy.
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| $NYAD |
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| $NYHL |
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| SPY:RSP |
While we are still bullish, it is concerning that Advance/Decline is still at 1:2 level. If this weak level persists, the possibility of hard sell off would get increased.
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| $SPX CVI |
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| $SPX STVO |
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| $SPX VTO |
CVI had small rebound today, that means very short term oversold condition is repaired now.STVO and VTO suggests one more leg down, but we would like to stay positive as we are waiting for option expiration.
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| SPY OI 05/20 |
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| SPY OI 05/27 |
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| SPY DWV 05/20 |
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| SPY DWV 05/27 |
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| SPY Option Big Trades 05/20 |
Please notice a bullish reversal trade at 14:08:03. This trader sold 10000x05/20 205 Puts, then bought 10000x205C. This trade was recorded after FOMC minutes, which caused a sell off today. I would say this trade is pretty much bullish and bulls should follow.
One more thing...
I'm following @FZucchi on Twitter who often tweet credit/credit derivertive market. According to @FZucchi, corporate bond issuance would exceed $260B this month and it would be the biggest May since 2013. This is an another evidence of Risk-on.
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