Option Analysis Setups: $SPY Poised for a Rally, but the FOMC is Lurking Ahead
Weekly Recap:
● Calls started to build higher bringing support up
● 400 level we noted as key resistance held
● Between 390-400 mixed flows so nobody dominates
● FOMC should create a range break
Major Market Indices & Option Flows
1: S&P 500 ETF ($SPY)
Last week we started off on Monday red, but quickly rebounded the next 3 sessions up pushing the key resistance level at 400. However, as we suspected and suggested in advance, 400 did not break. Markets touched it and spent < 2 mins there before rejecting to end the week with a red daily close, but weekly green close.
We expect Monday/Tuesday to be volatility compression days as traders will not take aggressive positions to be held overnight heading into the FOMC on Wednesday.
If there are flows on Mon/Tues, we expect them to be day trades closed at the end of the day.
This week is all about the FOMC and rates. If the result post FOMC is bearish, it will need to close below 390. South of 390, puts are in control which will increase volatility and negative gamma.