Option Analysis Setups: $SPY ST Bullish, But Not Ready to Back the Truck Up
Weekly Recap:
Major Market Indices & Option Flows
1: S&P 500 ETF ($SPY)
Last week markets were hesitant and a bit lower heading into the FOMC. But the post FOMC release and press conference saw a reduction in puts and price closing higher for 3 days straight. The key was closing and holding above 400, which now means calls are in control. We’re still in negative gamma on SPY but SPX is in positive gamma, so flows are mixed but more supportive than they’ve been in a while.
Overall we see the rally offer the recent lows being moreso from short covering vs bullish call buying. That + VIX going lower helped create twin tailwinds for equities, but we’re not sure how much more fuel VIX can provide at these prices.
For now its all about holding that 400 level. While we do, calls are in control, and the longer it holds up there, the greater the chance traders will buy calls above and ideally out further in STR’s + Time.
Meanwhile a break and close below 400 brings puts back in control and a likely VIX increase, providing headwinds.
ST we’re bullish, but we’re cautious because we’re not seeing share volumes tick up, meaning real money macro players aren’t buying this rally in droves.
So we need a bit more ‘juice’ to feel stronger about this life above 400.