Pre-2 p.m. Market Update

As you know, typically around 2 p.m. on an options expiration Friday the character of the market changes as the max pain pin is lifted, price does whatever it does which I'm not too concerned about from an analysis p.o.v., but it can be helpful for positioning. The real information is what happens in those last 2 hours on the 3C charts as they tend to pick up on the next trading day right where they left off, even over a 3-day weekend.

So lets see what we have before the 2 p.m. hour comes around.

As I said in the QQQ post, I think the May puts will be fine, but if I can book a little gain and re-enter at a better price, all the better so I had an idea of what would be reeasonable for me with a limit order and put it out there and it got filled.

This is the QQQ May $87 Put P/L

At a cost basis of $1.72 and a fill of $1.82 the P/L is not stunning, but 6% in this choppy noise is better than a stick in the eye.

As for the market and why I think I can get a better entry, thus the reason for closing the position to free up some dry powder... The SPY, QQQ and IWM intraday 1 min charts are all in line, the DIA is not, it's positive.

 DIA is the only 1 min intraday chart that is positive, the rest are in line or a bit worse, it's the slightly longer charts that look (so far) like a continuation of the noise trend that has plagued the market the last 3-days or so.

SPY 2 min is an example of where the charts start to shoe modest positive divergences in short timeframes.

 Here we have evidence of migration from the 2 min to 3 min SPY chart, so a bounce (of the noise variety) seems likely so I think it's okay to take the Q puts off or leave them on.

The SPY 10 min is where we see the higher probabilities beyond noise develop. This chart is leading negative and there's a gap area that makes a lot of sense for a noise bounce, but we'll see what the charts say over the next few hours.

The QQQ doesn't give any signal until 3 min, it's similar to the SPY so that lends some credibility (confirmation).

 However as early as 5 mins for the Q's, the divegrence is leading negative at a new leading low for the last several weeks, this is an important chart and why I think the QQQ puts for May would be fine.

 QQQ 15 min is also leading negative in a big way on an important timeframe, so I do want to re-enter the QQQ puts ASAP at a better price point if possible.

The IWM 2 min lends more confirmation/credibility with a 2 min positive, thus a decent reason to take what I can of the Q puts with the intent of adding them back at a better price point, less risk and "maybe" a slightly longer expiration.

The IWM 3, 5 and 10 min charts are all in line which is ugly as price is down and 3C is following it nearly perfectly. The 15 min chart really takes the charts from in line which is bad enough on a move to the downside and introduces the leading negative divegrence that has already made a new leading negative low.


Although I fully expect the last 2 hours of the day to give us some interesting information, right now the charts all seem to suggest that we are correct in largely sitting on our hands as this day to day noise/chop that is up one day and down the next looks set to continue to dominate for at least another day, however, it looks very clear to me that this market is transitioning to stage 4 from this bounce and this bounce in actuality is a volatility shakeout for the SPX and DOW so the downside implications are beyond taking out the lows of April 11th, they are about taking out the early February lows in my view.