Market Updates

So far the market is doing exactly what we forecast as I said today would be a dull day as well as likely open near yesterday's close and remain in an options expiration maximum pain price pin so the largest dollar value of options expire worthless and Wall St. who typically writes options gets to keep all of the premium paid by retail traders who typically buy options. This typically lasts until about 2 p.m. as most contracts are cleaned up by then, my broker is all over me by noon time to decide what to do with any options that may still be open.

Furthermore, I expected that we might go in to early next week to finish forming a short term bounce base or "W" pattern as today would largely be stuck in the op-ex pin, so far we are right on.

Note today's SPY range on this 5 min chart is right within yesterday's range as option expiration max. pain pins often are at least until about 2 p.m.

 On an intraday chart (1 min.) you can even see the small steering divergences to keep price in that range. earlier prices started to fall so some supply was taken in (white) to raise them, but when they moved a bit too far above the range, some supply was let out to bring them back down. I'm guessing the max-pain area is around the yellow trendline.

 The intraday QQQ shows the exact same behavior as it too remains within yesterday's afternoon range.

On a larger basis as far as what happens next probably toward the afternoon as the op-ex pin fades around 2 pm, it looks like the market is set to move lower which is what it would need to do to widen the short term bounce base and create a stronger "W" bottom rather than the "V" bottom that is in place now, so I suspect we move lower soon and at that point I may close the UVXY long if I see they are actually accumulating and building a larger base for a bounce in to early next week.

 The stronger trend of the IWM 5 min chart shows a positive divegrence at our suspected half completed base area. There's a chance we run higher rather than build a bigger base, but if that's the case, I would expect any upside move to fail rather fast as it doesn't have the base to support much of a move. So right now I suspect we come down a bit after the op-ex pin is over, widen the base with more accumulation and make a move/bounce higher likely in to early next week.

 Overall though on a wider view of the area on a stronger 10 min chart, the dominant divergence is leading negative (red) and the positive divegrence that looks smaller on this 10 min chart because the divergences on this chart are much stronger, thus multiple timeframe analysis bases on this chart suggests a bounce and a failure of that bounce and the market headed to a new lower low, thus it makes sense to short in to that bounce, not buy it.

The 15 min QQQ close up also shows the increasing probability of a bounce as a positive divegrence is growing in the area, but I still think it needs to pullback to the red trendline and maybe even a bit below to hit stops before any bounce to the upside, more reason for the bounce to start early next week.

However looking at the broader/wider view of the same 15 min QQQ chart, the dominant divergence is definitely leading negative with a smaller positive inside of it. Thus again it suggests a near term bounce, that bounce failing and a new lower low which is another reason to short in to the bounce.

If we take all of the timeframes and multiple timeframe analysis in this update, they suggest the max pain op-ex pin continues until around 2 pm at which time a pullback to or below yesterday's lows to create a "W" base with a stop run below yesterday's lows and a bounce in to early next week which fails and heads lower to a new low.

So the strategic and tactical trading plan is to short strength in price and let it take us to a new lower low.