Option Analysis Setups: $SPY Short Covering Rally Could Continue...
But the JUN Op-ex + FOMC is Looming
Weekly Recap:
● Markets had their first weekly bullish close in the last 8 weeks
● Most of the gains occurred in the last two days of the week
● While we think the gains are due to low liquidity and short covering
● We believe the short covering rally has room to continue this week
The S&P 500 posted its first bullish close in two months, albeit during a low liquidity holiday weekend. This bullish close took out the highs of the prior two bearish weeks and has found its way towards a key resistance zone between 415 and 420. The closing above 410 (where prior call interest was muted above) is a short term bullish sign IMO and we suspect this has generated enough call interest above to create a continuation this week (barring any new negative catalysts).
We are now seeing call interest around the 420 STR being the highest (both for calls alone, and on a call + put basis) suggesting this is the first upside target bears should be able to reach.