September 17 - FED DAY

UPDATE 11:00 SPY is squeezed 10 cents below the high. So far, it looks like it will break-out - but I wouldn't trust the move fully given the event and the momentum..

11:07 New highs, as expected.


11:11 Meanwhile, the $SPX is 3 points away from 2000. That's something...


UPDATE 1:10 So far, this steady extension-breakout holds - it's really a continuation of the past 2-day move...50 minutes to go before the announcement. SPX has hit 2000 - if we drop next week the media will be all over the place talking about that resistance.

1:14 I will book a partial loss on my butterfly spread simply because the Risk/Reward is not in my favor with the current price action. While a 0.7% drop (amount that turns it profitable) could occur into the tomorrow close, that would be only based on the hope and not fundamental factors.

1:21 SPY reaches 201.

1:25 The VIX futures curve...almost back to normal...but then there are exogenous events.

1:28 HUGE volume null ahead, looking at past 4.5 months.

1:31 One major outcome of the coming 2:00 pm release - the VIX should move swiftly either one way or another. 


1:34 However, the event could be largely priced in...something to keep in mind.


2:17 No interest rate hike. Wouldn't be surprised to see V1 over spot VIX into the close.


2:18 BOOM

2:19 V1 - Spot spread is around 0.3-0.4 points in spot favor.


2:22 Yeah vol, getting back to normal over there:

2:32 Squeeze is on. I wonder if those who anticipated a rate hike will unload their hedges until they expire worthless? Should create downside pressure on VIX.

2:41 202 on SPY brings 204 as the gap close.


2:48 202.5., price is vertical. 202.92 is the highest high into that gap down.

September 16

This is why I pay attention to the squeezes...they must resolve either in one direction or another:

9:24 Given the yesterday's run up, I would be looking to buy dips on the /ES today with the minimum target of 5 points. I would largely rely on WVF and BB's for entries.


9:27 Long-term portfolio has a large short in October /VX which has rolled front today with a hedge in /ES. I will unveil the hedge if we break to the new highs or get a substantial dip. I think that the fair value of front /VX is around 16-17.


9:38 New highs S&P 500. Adding some to the hedges right now might not be a bad idea, given the fact that /VX is very elevated, while SP is near resistance.


9:40 Options selling portfolio has only 7% left of the value on short VXX calls. Might as well cover and roll for the next week. The real deal here is to define whether to wait for an opportunity to short at a higher cost or to short right now and take advantage of the extra theta decay.


9:42 There is also a dilemma with long-term portfolio - add to hedges or book some profits or both? One thing that advocates for the extra hedges - a very important level of resistance is very close to where we are right now. I could simply unveil the hedge as soon as we break through it.


9:43 Relatively small range on SPY.


9:46 November/December VIX futures pair is practically flat right now. A good opportunity.

9:54 Entered Nov/December VIX spread for 0.05. Now might add to hedges with short /ES. Or buy some puts...

Funds recap

There are three types of funds:

1) Long-term fund which trades futures (/ES, /VX).

2) Short-term fund which mostly trades options (verticals, butterflies) and /ES intra-day.

3) Short-term fund which only sells options naked.

Each day I will post short updates with some larger recaps at the end of the week.

September 14

SPY is up unchanged

Today I will post without any reference to accumulators/delineators due to technical problems.

9:30 SPY has opened higher by 20 cents. The levels of resistance are just as close as the levels of support.

9:35 The vertical spread from the last Friday is doing great - market remained unchanged over the weekend and all that premium got burned.

9:36 Decent size on the first 30-minute bar of SPY, pretty much all down for the first 5-6 minutes.

9:39 A relatively sharp decline in regards to time. Morning fader could be an opportunity.

9:44 A slight morning reversal got faded quickly, testing the lows again.

9:46 New lows. I wouldn't be fading this move until we see some consolidation, looks pretty weak as of now.

9:49 Retraces half of yesterday's range, looks more appealing now, especially given the time.

9:50 Breaks below mid-point of yesterday.

9:51 Extension which got cancelled by buying force. Speculative fader opened, 6 calls.

9:53 I tend to think that this is just Monday morning weakness - but it could test previous support level..

9:56 Further consolidation, looks better...

10:01 Upside test. 

10:02 Strong 3-bar momentum, close above resistance. Looking at mid-point as for the next important level.

10:03 I would bet on new highs today, but the ideal scenario would be: range-bound until 11:45-12:15, with breakout and trend afterwards.

10:08 Further breakouts higher. Strong upside demand.

10:13 Some consolidation within 9 cents of the middle. Tests resistance.

10:14 Pretty low trade rates, as I look at /ES. Boring.

10:15 Another 1-min extension, price just tested the middle.

10:16 Breaks middle, still strong upside momentum.

10:17 Whether or not we would close at 10:30 above the mid-point of the previous 30-min bar is key.

10:25 Retracement below, and another upside test of the middle.

UPDATE 10:30 Price failed to close above the middle of the previous half-hour bar. There is some momentum after retracement, but I would imagine that the lows could still be tested. Another small spec position, previous break-even - 10 contracts.

10:55 Continued consolidation below the middle level. Might test previous support level shortly.

11:00 Some bursts of buying into the higher low. The ranges are relatively squeezed - 60-minute swing points could be a great play today.

11:10 A lower high in an upside test, getting squeezed more.

11:17 Extension down, tests support.

11:23 Incredibly tight range and we are testing down now.

11:31 Breaks down to lower ranges. 

11:38 Test of the lows, bounce.

9/11 in review

SPY is up by 0.45%

The gap down was small relatively to the recent ranges, so the open should've really been treated as continuation of yesterday's price action (SW +175, Slope +13). But the numbers were strongly negative going into late morning. The key today was VXX MP and the extension bars which we've seen prior to the first breakout - the time-line:

"11:25 15-20 cents bars up keep on coming as we are getting more and more squeezed. 

 11:27 Tests previous resistance. 

11:28 Exceeds it. SW -1003, Change -34 

11:30 Test major resistance level at 195.3; SW -965 and Change -32.

11:32 Algos have reversed into this breakout. MP bottoms. SW -891, Change -23."

So, when everything looked as a support test at 11:18 - consecutive lower highs and an all ready break to a new low - an incredibly strong bar appears, without any tails at 11:19. But, someone was buying before than that - each time price has moved into lower range, a big green bar appears:

The reason why I pointed it out - everything was ready for a breakdown, price right at the trendline with support right underneath, two small candles...and all of the sudden they stage a whole bar, retrace, another whole bar with continuation - 6 minutes and now we are talking about taking out resistance trendline with the previous high. 

I would say that the exact occurrence at 11:19 is of the biggest importance, exact that price behavior - a FULL extension bar, which takes 3 minutes to partially retrace, and right after we see another one with continuation. That tells us something about demand levels.I also outlined this example in the daily journal with big font using /ES.

The remainder of the trading action was relatively simple. We've bounced higher, but Liquidity led by Dark Pools started selling the highs:

"1:20 Price breaks below the close, I would expect it to retrace the extension which began roughly in the zone of 60-minute high."

Price retraced slightly under the 60-minute high, and at that point of time, I didn't believe in new highs, simply because we had everything on selling. The only positive metric was the VXX MP - which has completely led today's price action.

As price retraced it bounced twice, and then I believed that a further breakdown would happen. But it exploded with another extension at 14:19:

Nothing, absolutely nothing supportive, except for one metric that I have mentioned:

"2:21 A breakout at 2:20; SW -336 and Change +6. VXX MP testing down, SPY MP lower, small uptick in algos."

And only then, as the fader was happening, one minute before that crazy extension into the highs, something got me thinking:

"2:26 From another perspective, there was a long flattening in liquidity. Sometimes that leads to moves higher. So much uncertainty in today's trading...."

And at 14:30 an extension bar of 30 cents happens. The bottom line for this scenario? You really have to look at the price behavior, align it with what you see on the Primary's metrics and pay some attention to accumulators:

We've had a gap up on Wednesday, which sold off and partially filled the previous gap up - a strong down cycle. The next day, however, there has been a strong enough bid right at the lows of Wednesday to drive price higher - regardless of the downside potential, which was partially absorbed (to the point when the Primary even turned for 1.5 hours). From that point, price has moved very strongly in large consecutive extensions, strong momentum, which allowed the Primary to turn up - but it was already gone by then. Obviously, given the swift move the previous day, there were profit takers and cutters of losses, which explained the weak close.

We couldn't go long at the open because of the negative momentum - but we've known that the absolute risk in that situation were the lows formed on the 2-day period (Wednesday/Thursday). Plus, I also outlined in the yesterday's analysis that:

"Given the positioning of the primary and an afternoon reversal today, I would expect it to turn down at the open, and for the price to test the lows (end of the volume null). I do not think that the lows would get successfully broken" 

The key points for today were in that late morning reversal, which has shown that SW easily moved from -1500 to -400, so as the slope - from -80 to -30. If these buyers were able to do that, and they formed another intermediate lower low - that was a strong sign.

After all, we've seen today exactly what is a reasonable ending of this week:

"UPDATE 10:00 SW -1459, Change -75, Slope change down confirmed with strong momentum - but this is really just a continuation of the previous down cycle, and we might see its terminating phase today - hopefully."

 Today was a hard trading day; Friday trading, low volume, mixed signals from different metrics. However, we really had to focus on the fact that was known at the yesterday's close - the lows won't get broken,


What I see as perfect setups for today:

1) 11:30, range breakout, fading SW and the Change:

This comes to mind given the outlined facts that the support won't get broken and the appearance of the extension bars, which ultimately made lows higher and higher.

2) 11:50, 13:43, 14:08; the breakout of the 60 minute range, SW/change reversal:

I love the breakout of the 60 minute range, especially when there was some consolidation before it happens. Today it presented one good opportunity (pre-afternoon), one small fakeout (consolidation) and one great opportunity (the run into the close).


3) 14:20, range breakout back out of the 60 minute range, VXX MP, SW/change, consolidation after the retracement:

While this is also a variation of the opportunity number 2, this arguably had a stronger definition of risk - a break below the lows of the consolidation, and an overall safer setup.


Overall: I filled my deeply out of the money vertical spread during the afternoon retracement, which was roughly $1.2 lower, than the today's close. Given the need of taking the opportunity of theta decay over the weekend, this probably was the most reasonable entry on the day.

BOTTOM LINE

Good (quiet) day, which hasn't shown much buying, but the volumes were extremely low anyways. We had a terminating phase of our 3-day down-cycle, which positions us into a move higher, given the strong support underneath the current price with heavier volumes, than the resistance on top.

September 11

SPY is down by 0.44% pre-market

9:19 Current scenario isn't necessarily bad for our verticals, because a big portion of the risk premium yesterday was attributed to a big gap at the open. However, the downside risk is a whole lot higher, because the Primary is likely to turn down at 10:00, confirming at 10:30.

OPENING 9:30 SW has opened strongly negative at -1276, Change - 79. The Primary has turned down immediately, confirming at 10:00. The Secondary is down by -26.

9:38 The scenario I have outlined yesterday is pretty much in play, there are some tests in the direction of the gap fill, but I expect for the price to reach the area of yesterday's lows.

9:42 Price fills more of the gap, SW -1062 and Change -69.

UPDATE 9:45 SW -1042, Change -68. SPY MP up, Liquidity shows selling into the gap fill. VXX MP up.

9:46 Price consolidates in the upper part of its range, should be testing down soon.

9:48 Given the position of the Primary, I ignored the probabilities of the upside loss on my vertical spreads. There is 27% chance of loss to the downside at the moment.


9:49 Price moves into the lower range, today's lows are matching support level from yesterday...Condition: strongly negative SW and Change, Primary is down, partially filled gap with consolidation that has failed to breakout. Should be going lower.


9:52 Shored some /ES into that consolidation, but will cover if price moves higher. Would be quite unusual though.


9:53 So far SW had range of about -1000 to -1300.


9:55 Seeing lower highs, breakdown should be coming at 10:00 or so.


9:59 New lows. Covered /ES for almost the target size - 4.25 points.


UPDATE 10:00 SW -1459, Change -75, Slope change down confirmed with strong momentum - but this is really just a continuation of the previous down cycle, and we might see its terminating phase today - hopefully. SPY MP flattens, while all Liquidity is strongly down into the lows.


10:03 Price starts squeezing.


10:06 SW -1501, Change -78. SW expands its range to the downside.


10:09 Double test of the downside and now second upside test. Breaks above. The bars look good.


10:14 /ES is squeezed. SW -1387, Change -72.


10:17 Another strong up-bar that might be tackling the mid-point of the day. SW -1148, Change -60.


10:28 Price moves back into the range, squeeze continues. SW -1086, Change -57. I'm watching for SW to get past 1000's.


UPDATE 10:30  SW -1160, Change -51. SPY MP moves sharply lower, algos are down, DPs flattening, VXX MP flattening.


10:33 It seems that any 60-minute breakout is a strong setup today. The range is pretty narrow.


10:43 Price rebounds to the level of the previous pop, but MP falls into this rebound and Algos are selling, showing strong divergence. SW -1121, Change -49.


10:51 Price got rejected at the same upside level twice. SW -1125 and Change -49. With the current numbers, I would expect a new test of the lows.


10:54 Algos continue selling and MP continues to fall. Price tests previous support before the lows.


10:55 With the overall absence, 2 small sell programs took out the intermediate support. Price is within 20 cents from the lows.


UPDATE 11:00 SW -1292, Change -48. MP / Liquidity continue lower. Any selling would increase the SW and the Change, thus extending the cycle. Price has made a new intermediate low, and I believe that past highs won't get exceeded, as of now.


11:11 It seems as the lower high has been formed. A move down into 12:00-12:30 with a reversal is a possibility.


11:13 Price is squeezed since 10, and now it's also squeezed by the resistance levels. A move should be coming.


11:17 Liquidity has been flattening for the past 30 minutes.


11:18 Lower highs...

11:20 Extension bar at 11:19. Hasn't affected the accumulators. 


11:24 Continued selling on liquidity, a slight reversal in SPY MP - and a rise in VXX MP. SW -1062, Change -37.


11:25 15-20 cents bars up keep on coming as we are getting more and more squeezed. 


11:27 Tests previous resistance.


11:28 Exceeds it. SW -1003, Change -34.


11:30 Test major resistance level at 195.3; SW -965 and Change -32.


11:32 Algos have reversed into this breakout. MP bottoms. SW -891, Change -23.


11:38 We can observe the SW reversal from -1500 to -843 at the moment, at the Change wasting all that -80 downside energy on the consolidation, and being -21 at the moment. I would treat these two past two days as the final part of this down cycle.


11:40 Extension bars to the upside are testing the HOD. SW -688 and Change -13. Spikes on the Accumulators.


11:41 We might see a gap fill, but don't expect any serious trend. Slope is -232, will probably get into -250 and won't turn up today. Which is good. Because that would simply cause another low momentum up cycle. 

Instead, we could bring the value of the Primary closer to 0 during today's range bound trading. 


11:43 SPY MP is down into the move higher, which supports our expectations for range-bound. I would be thinking about opening a bull put vertical, as price moves a bit lower into the range.


11:52 New highs. SW -623 and Change -10. Further decline in SPY MP and overall Liquidity, which can't be attributed to neither Algos or DPs - weird. VXX MP is about to test down.

The squeeze has expanded to the upside.

11:55 At the moment, price is in the high volume concentration range and out of the lower volume null. However, lower volume null remains largely unfilled. I remain skeptical of further upside potential, because neither of the factors that we focus on are supportive at the moment.

I am even considering putting on a short bear vertical with a B/E just above yesterday's resistance levels...gap is pretty much filled, and price could reverse.


UPDATE 12:00 SW -496, Slope -225 and Change -2. SPY Liquidity continues lower, while Algos are buyers and DPs are slow buyers. SPY MP continued lower into this breakout and is now flattening. Price consolidates right near yesterday's close. I am waiting.


12:03 A pop in activity and gap is totally filled, as price exceeds yesterday's highs. Big extension bar with buying domination. SW -296 and Change +8.


12:07 Look at how a squeeze on /ES has

exploded after some consolidation with higher 

lows and after the slope of the EMA turned 

positive:

12:10 The 5-minute will turn up in 10 minutes or so. VXX MP lower, SPY MP is flattening, Liquidity (all) flat regardless of Algo buying and flat DPs. 


12:13 Rather strong momentum from the lows, price tests the descending resistance line. SW -240, Change +11. Little spike on Liquidity which is independent of any sources.

12:17 The 5-minute will turn up at 12:20. Given the extension, I would wait...Meanwhile, slightly out of the money vertical looks appealing given the Friday and the extension...but who knows how SW could reverse today.


12:19 SPY MP is turning up, VXX MP down to flattening, Liquidity flattening and slightly up, Algos are buyers. DPs just recently sold into the spike and now are testing down. SW -220, Change -12. Price found resistance at the last hour high of yesterday.


12:20 The 5-minute has turned up. I would wait at least another 5 minutes.


12:25 Placed a tiny spread 197/198, B/E is the yesterday's high. Small decent scalp given the amount of time at risk and the possible upside potential. Here's the combined position into the close:

And levels:

More than 1% of possible move to the upside and 1.2% to the downside.


12:32 VXX MP continues down, SPY MP slightly up to flattening, Liquidity (all) tests down, Algos flattening after some selling, DPs selling. SW -257, Change +10.


12:39 Price breaks below the close, heavy DP selling, VXX MP flattening. SW -283, Change +9.


12:44  So far it seems that the descending trendline is still in its place. Price bounced off of it.


12:45 Continued selling on DPs and Algos, as price remains to consolidate and squeeze in its range. SW -205, Change +12.


12:49 A burst of small programs, 4 up bars in a row and price is testing the highs once again. SW -90, Change +18. 


12:52 New highs, SW -56 and the Change +20. VXX MP continues lower, SPY MP slowly higher, Liquidity (All) remains down, Algos relatively flat on the day and DP's are heavy sellers. Price tests the last resistance trendline.


12:56 The Change is higher than I expected, so I doubt that the Value would drop post +1000's...which limits out expectations of the next up cycle.


UPDATE 1:00 Price continues to remain in the range defined by the previous close and the last 1-hour bar high of yesterday since 12:00. SW -52 and the Change +18. SPY MP flattening, VXX MP continues lower, Liquidity lower, Algos flat and didn't support the last move up, DPs sellers.

Weak liquidity, Algos aren't buyers, MP is down on the day - the only metric that supports us right now is the VXX MP. 196.42 defines the opening of the second volume null, which is just ~ 10 cents above our intra-day high. However, given the selling we've seen, low MP, low change and neutral SW; there could be funny things happening going into 2:00 pm.

The only good thing right now is that the Secondary, which flipped down at the open, remains up again, only needing SW higher than -730 to do so. I would expect to close modestly lower than where we are right now (196.07) based on the metrics I listed. Program activity is really low so far as well.


1:18 Price failed to exceed the high and is now in the lower end of its range, testing previous close. SW -212 and the Change weak at +10. VXX MP has reversed, so as SPY MP; Liquidity down, Algos selling and continued DPs selling. 


1:20 Price breaks below the close, I would expect it to retrace the extension which began roughly in the zone of 60-minute high. By that time the positive Change will be gone. Range-trading today, as expected.


1:22 We've seen only higher lows during this week, but a break below the LOD today would cancel that, since it would likely bring a test of the yesterday's lows at the end of the first volume null. Price is being squeezed in between yesterday's lows and today's highs, which define two major breaking points. Lower highs since the Wednesday breakdown are still intact.

1:25 A retracement which I outlined at 1:20 has completed itself, SW -336 and the Change +4. SW defines everything at the moment. VXX MP moved higher and flattening, SPY MP flattening and testing down, DPs were continuing selling until this moment, Liquidity lower, Algos selling. Weak.


1:29 For some reason my vertical today wasn't filled. Oh well. Price tests 60-minute range high and will probably move lower. I would expect support to be in 195.2 range.


1:31 In fact, vertical got filled, but in some weird way. It looks like one position cancelled a part of the other, but at a profit. That was something to consider before placing, a big mistake. I would close verticals regardless near the close in order to put up one for the next week.


1:40 Filled first bull put spread for 2% gain / 6% at risk.


1:50 SPY MP testing down, VXX MP reversed a bit; Liquidity - down, flattening; Algos selling since the high, DPs really down and selling since the high. SW -488 and Change -3. We have retraced most of the extension, and if accumulators were supportive, I would be saying that SW could reverse to the upside once again; but they are not. There is good support in the lower zone of today's range, but we could easily close into it as well, with a lot stronger negative SW. So the Secondary flipping down today is still very much a possibility.


1:57 A small burst, SW -425 and Change -1. No support from accumulators, overall Liquidity flattened and up-ticked.


UPDATE 2:00 SW -425, Change +1, Value +894, Slope -193. Price has failed to rebound and approaches the previous low. SPY MP continues down, every liquidity accumulator is flat. It's Friday, volumes are low and I attribute less importance to accumulators. I'm interested whether they pull something extraordinary with their programs coming into the last 1.5 hour or not...


2:11 A higher low and now price surges in 3 small extensions. Nothing different on accumulators. SW remains -460, Change 0.


2:21 A breakout at 2:20; SW -336 and Change +6. VXX MP testing down, SPY MP lower, small uptick in algos.


2:23 Price is above the close once again. SW -307, Change +7. 


2:26 From another perspective, there was a long flattening in liquidity. Sometimes that leads to moves higher. So much uncertainty in today's trading, that's why I hate Fridays.


2:27 SW -278, Change +9.


2:31 UPDATE Very big extension bar exactly at 2:30. SW -251, Change +10. SPY MP reversed up, liquidity still very flat, VXX MP lower. 


2:40 VXX MP continued lower, and SPY has almost reached the HOD in a series of extension bars with minor digestion. SW -140, Change +16. SPY MP slightly up, Liquidity is slightly up due to Algos.


2:50 VXX MP still continues lower, SPY MP flattening, Liquidity flat, DPs selling more. Price is in its upper range; SW -176 and the Change -14.


3:18 VXX MP is falling apart, SPY MP continues up, Liquidity (all) is flat, while Algos are buyers since 14:16. DPs got extended around 15:00 and reversed since then. SW +43, Change +24, Value: 570. 

3:19 Price has made a new high at 15:17. Besides thinking about lower ranges and more consolidation, we has held the support as expected. Overall, it seems that all of the downside potential that we've got on Wednesday has been totally absorbed in the levels of 194-196. 


And in fact, we should get decent conditions for today's close: 1) Value close to 0; 2) low slope below -100; 3) Neutral SW; 4) The Secondary in up-trend.


3:36 SPY MP continues up and VXX MP down; a spike on SPY Liquidity which can't be fully attributed to uptick in Algos - must be something else. SW -66, Change +16, Value 427. 


3:37 I haven't said it yesterday, but /VX declines much more rapidly, than /ES rises.


3:38 SW +8 - turned positive. Quite a reversal. 


3:39 The slope will be in low -100s at the close, and Value around +300 or so. High SW at Monday opening could turn the Primary up immediately.


3:44 This volatile week might close barely higher than its opening level. Or lower. Within 5 cents of that level right now. 


3:47 It looks like we broke that last descending resistance. 


3:49 One can note how low activity today was by comparing /ES tick chart of yesterday and today...probably a quarter of the activity we've had yesterday:

3:50 Overall, this was a solid week higher, with an ugly Wednesday - but that needed to happen in order to make the next solid, irreversible move higher. The last two days were also strong, despite the originated down cycle and strongly negative SW. The only things missing - buying on liquidity and higher bid on MP.

3:52 2 one minute extension bars push price to the highs off the consolidation. Some buying activity on the accumulators. SW +17, Change +21.


CLOSING READ 4:00 SW closed weakly positive at +226, Slope modestly weak at -125, decent Change at +31, and the Value of the Primary at +442. The Secondary remains in the up cycle and continues to show strong positive divergence.