As we start the trading day, we are reflecting once again on the S&P500 and SPY. As more monthly OPEX dates pass, and open interest expires, institutions, dealers and market makers have returned to a more neutral status.
The exacerbated move in February forced these same “over-leveraged” participants to sell futures, further increasing the speed of the descent. Now that time has passed we look for catalysts that can propel the indices out of this range. positive news would assist additional call buying, which in turn would help neutral gamma shift to positive. We haven’t seen the data to suggest this scenario, rather volume has been pretty low.
SPY Daily Range
Observations; RSI is above 50 and tilted higher. Thats a plus. Price action remains above the 9/21d moving averages. Both are rising. Plus and plus. MACD is flat and fading. That’s more bearish but still neutral.
Volume is tapering off. Again, we need to see higher volume, with price rising, not falling if you’re bullish. We wait for that to happen.
If you are trading, it helps to visualize the environment to formulate a plan.
With this in mind, our plan is to trade cautiously, taking swing profits off the table at the open every day as soon as topping candles suggest an exit.
The 200d is resistance overhead. 290/2900 is an important threshold.
Until price action moves above 290.00 (+/-), 2900 on the S&P500, we are in a gamma neutral state. If you’re bullish we need to head above that zone and see more calls being bought to help shift that gamma to bullish.
There is also an equal possibility for price action to stay between 280 and 290 (2800/2900) or move below the 21d (280.06). A move below this level would have us shift to a bearish view.
New positions are day trades to start. Watch VWAP for guidance as the linked article outlines therein. Focus on the strongest sectors, XLK and XLV.
Forget your opinion. Trade price action and watch what institutions, dealers, and market makers do over the next few days.
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Happy Trading,
Vinny
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