Option Analysis Setups: $SPY's Looking Weak While Volatility Dislocates
Post FOMC - strength still not there yet
Single stocks showed their weakness with most closing lower, thus dragging indices down. Meanwhile indices were mildly divergent only closing marginally lower. The FOMC was less hawkish thus creating a massive 3+% rally ITD (intraday). However, this rally was promptly unwound over the next two days showcasing underlying weakness in the markets.
Weekly Recap + Market Abstract:
The S&P 500 started the week with a solid short covering/Vanna rally only to naturally compress heading into the FOMC. After the announcement, the initial response was mixed, but thanks to a CNBC reporter asking about 75-100bps rate hikes, the Fed declined, suggesting the level of hawkishness was no greater than anticipated.
Markets promptly reacted with long put holders north of the 420 strike closing and traders selling vol through short puts.
The subsequent 3% ramp was impressive but was met with an equally impressive about face the next day, losing over 3% and closing lower the next two days.
This IMO is showcasing the underlying weakness in the markets overall to maintain a bid or any positive news + prices for too long.