6 replies to this topic

[thoughtpwr]

With stiff peak call open interest resistance at SPY 210, I am not sure we fail in this rally without some magic. Most of this was bought to open, so the owners of these calls want them to finish in the money. 

 

The easiest way to make new highs appears to me to be a up gap of 10-15 points that allows a short rally to exceed SPY 210 rather quickly. Then the market holds above 210 call support for 2-3 hours and on Thurs PM begins to rally to the 211 and 212 area starting in the PM. This takes advantage of the huge open interest at 210 to reach a new high over the next two days. If the rally goes a linear route to get to 210 by Friday, that means 210 becomes resistance on Friday rather than support and the rally potentially fails. But the boys can use the open interest as support for an entire two days to get to a new high if done quickly. The timeliness is the key. That would also attract money and make the full two weeks a potential gold mine in terms of 2015 gain. In addition, a high level gap would act as support on any retracement to enable a full two even three week rally to amount to something substantial, like +10% for the year.  It turns out good put support is at 209 and 210 next week, so getting to a new high this week is important for next weeks action.

 

If you think this is far-fetched, then what do all of those fund managers who up until today had ZERO or NEGATIVE gain for the entire year want to happen over the next two weeks?  These guy's lively hood is on the line and given any opportunity, they are going to step in. They have the cash, since they pulled their bids most of last week. Time to make hay .......

 

With Japan up +2% and China/Hong Kong up 1-1.3%, if the Europeans put in a good performance, it makes it a lot easier to make this wet dream a reality. If I can conceptualize this scenario, they probably have implemented it.  

 

Anyone got any other good scenarios?

Edited by thoughtpwr, 16 December 2015 - 11:17 PM.

[thoughtpwr]

Went back to an article from Schaeffers Research that said:

 

"As alluded to earlier, it seems the harder the S&P falls in the first two weeks of the month, the harder it rallies in the last two weeks. The index has been down by 1% or more in the first half of December on 17 occasions during the past half-century. Following these instances, the SPX has come back with a vengeance, with a positive second-half finish 88% of the time, and an average gain of 2.5%.
 

And if you're still not buckled up, just take a look at the S&P's typical December path over the past 50 years:
 

[Ticker]

Do you think options max pain is relevant? SPY max pain is about 206.5 for expiration this Friday.

[thoughtpwr]

Yes it is we could retrace after reaching 210, if rejected there. 

[Ticker]

I think it's more likely we go sideways for the next couple of days.  We can then have a small rally up to about 2100 next week.  I think we slowly trend down the last week of the year and into next March.  That would be my best guess.  Staying partially long until after Christmas.

[thoughtpwr]

If we stall, I think that is guaranteeing a bearish outcome. Only a new high has the chance of keeping it bullish. 

 

After looking at AAPL, if it can come alive, it will give the SPX the boost it needs as I see it has yet to put in a bottom of any kind this week. Yikes!

[risk_management]

Another interesting post TP.  About peak call open interest.  Is this something you came up yourself or the concept is openly out there?  I never really delved into option data for my research.

Edited by risk_management, 17 December 2015 - 07:49 AM.