Rebound?

The market rebounded today. For the RUT, this was a substantial move off support. The NDX lagged but AAPL beat results after hours and that should put the market at a higher open tomorrow. Looking at the RUT chart, you see that a move higher was expected by the position of the Momentum and Near-term lines of the MFC (Market Forecast Chart, in the middle of the graph below). However, the Market Sentiment has completely rolled over from a very high level and is pointing lower now.

Tomorrow is the first of the month, so a positive day is expected. This is not the end of the sell off however, in fact it has not even begun!

Seasonally, February is the weakest month of the 6 month bullish period starting from November. In post election years, it is one of the weakest months of the YEAR!  Nasdaq stocks are usually the weakest in February. 

The SKEW is again on the rise - upto 138 now! I am going to look into what happens when the SKEW clusters for an extended period over 135. 

Put/Call ratios have been stuck in overbought conditions for an extended period. The VIX is also beaten down. Yet, both yesterday and today, the VXST traded above VIX intraday. This is a strong sell signal. 

Figuring tomorrow would be bullish, I traded out of both the NDX and SPX call spreads. 

I bought back the NDX 5140/5150 Feb2s for $3.50. I also traded out of the SPX 2185/2195 calls expiring Friday for a small profit of 30 cents overall. 

I am going to look to put both of these spreads on again tomorrow for larger credits as the market should have a positive day tomorrow. That may be a short reprise, however. 

Sell off

The overnight pressure to the downside carried through to the morning session with a strong sell off across all indexes within the first hour. The indexes took the rest of the day to fight some of that off. This is not going to be the end of this sell off, however, as the SKEW rose today to 134+. Meanwhile, VXST traded higher than VIX several times today, marking more volatility is coming. The VIX is still extremely low.

There is good reason to believe that the recent high on the NDX will hold for sometime. The RSI is falling back out of the upper extremes. Today's candle was an ominous retracement to the breakout area, which is holding as very short term support right now. The Double Smoothed Stochastics are also very high on the chart and could start rolling over soon.

I traded out of some of the NDX spreads today. I bought the NDX Feb2 5160/5170 back for $2.20 and the 5160/5175 spread for $2.85. Having brought in a credit of $1.05 originally, these trades are manageable losses.

I still have the NDX 5140/5150 trade in place, along with the SPX 2185/2195 calls. If needed, I will roll these out further.

In the meantime, I may buy some VIX call spreads on the open, just to take advantage of the high SKEW.

Opens higher, closes flat

The overnight move was again impressive. The NDX especially was strong and opened with a gap. That did not hold and the indexes closed on their lows. After hours, GOOG missed its earnings estimates and sold off about 3%. This could put pressure on the NDX tomorrow.

The SKEW went up a bit to 129 today. It's still a high number, but not extreme like a few days ago.

VIX fell today and ended in the 10 handle. VXST remains only slightly below it at 10.05.

I had to move a lot of trades around and add more put spreads. Yesterday I added a small bull put spread at 5070/5050 for only 70 cents. Today, I added another at 5100/5090 for 40 cents. These are just trying to cover some of the adjustments to the calls. They all expire tomorrow in the AM.

I moved a few NDX call spreads yesterday to next Friday expiration for a credit of 20 cents by widening the strikes from 5130/5140 to 5160/5175. Today, I moved the rest of the 5130/5140 that were to expire tomorrow out to next Friday by moving them up to 5140/5150 for a debit of $1.80.

I did not move the SPX calls at 2285/2295 as they expire next Friday. There is a good chance we will see some pullback before then.

This bullishness is really spectacular given the low level of VIX and the length of the rally already. The RUT has not made new highs yet, however, and was leading to the downside today. This may foreshadow weakness in the market soon, but until signs of a reversal arrive, the market is bullish.

Super bull

The market made a big move overnight and after a short bit of selling in the morning, went on to make new highs. The DOW made it over 20,000 finally.

The NDX broke through the call spreads, so I began moving them out to next week. I also added put spreads way down at 2070. For the next few weeks I will be battling with a strong uptrend. At any time, we could get a sharp pullback to retest the breakout, especially if big tech names' earnings come in light.

Bullish day, but SKEW is way too high still...

Today was generally a continuation of yesterday's move. The markets opened higher and after a brief test of yesterday's close, they moved higher in spurts throughout the day.

The NDX broke above 5100 and made a new high. This pushed the RSI line above 70, a place it will usually not stay for long.



Meanwhile, the SKEW rose slightly today. It's still marking really high numbers, showing more volatility is likely in the near future.

Volatility fell, but on such widespread bullishness, short term measures still remained above recent lows. At the same time, longer term measures broke to new lows.



I tried to move the NDX call spreads up about 30 points and out until next week for a credit, but I could not get filled. Tomorrow could have some follow thru (at least intraday) in this rally, but the next few days could be flat. So far our spreads are not being tested.

Nothing happening

The sideways pattern continues without a move of greater than 1% on a daily close basis for the SPX. The NDX is most bullish, and the RUT is most bearish.

Typically, this week is bearish - especially for the QQQ - until Friday.  The SKEW is still high, at 137 today, so it supports that more volatility is ahead. This may only be intra-day moves however, like today, as the SPX is very stuck in a tight range between 2230 and 2280.

Volatility itself is low with the VIX marking 11.54. Today VXST did shoot up to 10.94, which puts it close to crossing above the VIX. If this happens, the market may actually begin a more serious pullback.

TRIN was more negative today, especially on the open. It was not excessively so, however.

I traded a short term NDX call spread that will expire this week. The 5130/5140 is placed just outside a 1 standard deviation move. I was able to get a credit averaging $1.01 for the spread. This should close solidly out of the money by Friday morning, but if we get an uptick I will move it out.

Market still wary - even more so now

So much talk about 'buy the election, sell the inauguration' on every news channel just makes the markets worry more it seems. The SKEW hit 146 - a really big number! When combined with a very low VIX, which fell today on monthly options expirations, this is very often a sign that volatility will rise sharply in the days ahead. This makes sense, as we finish out the bearish mid-January season before the end of January bullishness kicks in.

On a grander scale, the SPX could be setting up for something larger. The Market Sentiment line (bottom graph on SPX chart below) is fully extended into the upper most bullish area. This signals that even if the market continues to rise, those gains will not be significant and will be given back in the future. This has happened a few times in the past as the Market Forecast line (middle green line) drop out of the upper reversal area (above 80).



The TRIN is acting very strange these last two days also. As the market is going nowhere, the TRIN is posting fiercely bullish numbers, yesterday hovering around 0.6 and today on the open it hit as low as 0.37! It seems large traders are leading this market higher buying only the stocks that are posting new 52-week highs. Very selective buying does not lead markets higher!

On today's up day, I tried to get some call spreads filled. I only caught one trade - the SPX Feb3 2285/2295 for $3.20.  I have been working the SPX 2285/2295 this month with some success. With $3.20 credit for a 2 week trade that would require the SPX to make and hold a new all time high, I feel like I am off to a good start next week.

Let's see what happens as the market gets used to new US president next week. Today's action was like a repeat of the action witnessed on the day of his recent press conference. The minute Trump started his inauguration speech the SPX dropped 6 points. It only settled down after he stepped away from the microphone. If he keeps talking the market actually may start taking him seriously. This may kill the market rally named after him.