Market Update – New lows inbound?
Yesterdays move was big , a huge decline across all markets following a hotter than expected CPI. Two observations yesterday that are striking.
A lack of put vs call activity in the options market so little demand for downside protection.
Yesterday was the only time in history that SPX fell by more than 4%
Now we’ve come down significantly the Friday OPEX is back in focus. Due to the activity above unless we break below 3900 today downside should be limited going into Friday. Might even get some small relief today and tomorrow
4000 is the resistance on SPX. Possible we see this level tested before a further decline
Then we have the OPEX Friday. This is a key date because two things can happen that could lead to a nice relief rally or a further decline….
If traders decide to rollover the contracts into the next expiry – (meaning they keep hold of the puts) extending the duration out further this will lead to a further decline.
If traders decide to take profit on the Puts / not roll them into the next expiry the MM Won’t need to be as hedged and will buy the underlying.
I think the likelihood of a roll into the next expiry is the most likely scenario, leading to a further decline. But we need to see what the market does here and its crucial to keep an eye on. I think if looking to take short side bets waiting for that 4000 test and for Friday is the best thing to do here.
ETH – Expecting and waiting for this move… 1660ish retest…