Saturday, September 9, 2017

Chasing Unicorns

Market prices were slightly lower than expected last week, but very much in line with the trading range expected. Unfortunately, both bulls and bears may be chasing unicorns if they expect much difference since the outlook for the rest of September is more of the same.  Today I am adding a new section in the appendix on short term trading observations for discussions on topics for trading tips that are too long for Twitter.

I. Sentiment Indicators

For the main indicators, I am going to continue to show back to 2015.  The overall Indicator Scoreboard continues to hover near neutral with little pressure to push prices higher.

The Short Term Indicator (VXX $ volume and Smart Beta P/C) still remains highly elevated with the result of placing a floor under prices for a market that seems to be faced with endless reasons to go down.

Today I want to take a short term view of an indicator that has recently done a good job of anticipating price moves, the SKEW.  From 2014 thru 2016 the SKEW seemed to work as a "price change" indicator, where large changes, both up and down, occurred when at high levels, but in 2017 has been more of a trend indicator.  As a confirming indicator, BUY and SELL levels are reversed.  High levels of the SKEW (140) have done a good job of anticipating declines, while low levels (130) have anticipated up trends.  Current levels are neutral with the direction indicating an up trend (pullbacks will be minor).

Moving on to bonds (TNX) bearish sentiment remains at fairly low levels as rates continue to decline while the seemingly endless list of perils are driving rates down, even though the stock market seems not to notice.

For the gold miners (HUI), sentiment remains moderately positive.

II. Options Open Interest

This week I will look at the SPY and QQQ thru EOM since the NDX/QQQ seems to be the main source of volatility.  First for Wed, the SPY current price (246.6) is at the most likely pin so any early moves are likely to be reversed by Wed.

For exp Fri, the SPY most likely pin is just below 245, which would be SPX 2445, but the range of 244-6 is open.

For the week of Sept 20, SPY a move to the 245 to 246 area seems likely with strong resistance at 248.

For the week of Sept 29, SPY resistance moves up to 249, so 247 or slightly higher seems likely.

Looking at the NDX/QQQ for exp Fri, the current close (144.2) is most likely so any moves up or down are likely to be reversed.

For Sept 29, support is very strong below 145, so 146 or higher is possible with 145 most likely.

Conclusions.  Last weeks outlook for an extended trading range mostly between SPX 2450-2500 got off to a good start, even with a spike low to 2445.  More of the same seems likely thru the EOM.  I wonder if Trump pulled an end around with the Dems by agreeing to put off the debt ceiling decision since this leaves the Reps free to concentrate on the tax cut proposal.

Weekly Trade Alert.  Still a very boring outlook.  SPX may hit gap at 2476 on relief rally (SELL) if Florida survives Irma and Nuke Korea doesn't threaten anyone over the weekend with SPX 2450 or lower likely by EOW.  Updates @mrktsignals.

Short Term Trading Observations, update 2017.09.05, "new put" support is bearish

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