Cobra's Market View

Down 2 weeks in a row, the next week has 65% chances to close up with profit factor 2.1 which is good.

SPY daily. Hanging around the EMA 50. Extreme chop since November 25. Danger zone.

From Twitter

SpotGamma
@spotgamma
The "Gamma Trap" Dec SPX has 3.3mm puts which is the largest of any expiration. The chunkiest of these puts are likely held by funds which will hold to 12/17 expiration. The 4000 strike has the most put interest. If the market goes under 4500, the gamma trap could set: (1/n)
A declining market means dealers have more futures to sell in order to hedge those existing puts. This fuels volatility like pushing a ball down a hill. Furthermore implied volatility rises, increasing put values, requiring larger hedges. Dealer selling leads to faster market declines, which brings more selling (ex: margin calls). The fear brings out more put buying. Implied volatility goes even higher. Dealers have to sell more futures to hedge both new puts positions & existing positions. The "trap" is this reflexive feedback loop of dealer selling which leads to put buying and more liquidations which leads to more put buying which leads to more dealer selling. Then, suddenly, on 12/17 those 3.3 million puts expire. Dealers find themselves short too many futures, and needing to cover ASAP. Trap released. Markets rally. Consider 2 other major lows coinciding with the day after OPEX: Dec 24th, 2018 March 23rd, 2020

“Who you gonna believe, me or your own eyes?”
Most know that when people get too nervous they tend to sell their “riskiest” assets first
That creates a “RISK-OFF” profile that looks like the chart below
You can draw your own favorite markers, but many use above 50ma=RISK-ON and below 50ma=RISK-OFF
Meaning that bulls won’t be safe until they can sustain prices above 50ma … or better yet…. new highs
Then they buy "defensives" which are considered less risky
https://stockcharts.com/public/1684859

2 minutes from the CBOE, Friday
SKEW shows continued demand for out-of-the-money puts
[Pasta: although not as much OTM put demand compared to September]
https://www.youtube.com/watch?v=PSQpD46hOao

$AAII Bull - $AAII Bear shows more bears, close to extreme now so if sharp down again the next week then probably it'll yell a bottom. I'm still thinking in the bull's way so just don't believe the next week will be sharply down.

There was a 90% chance of a down year in tech based on the fact it posted back to back 40% annual gains. This still might come true. Moon cycles favor bears until just prior to the Santa Claus rally. The markets are predicting new lockdowns which have yet to be announced. Oil down $13, nat gas down $1, small caps approaching bear market. All point to new global lockdowns. We won’t bottom until those are announced, and the next couple of weeks could be among the worst ever in US history if tech is going to close down on the year.

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ALMANAC
"Typical" December
https://jeffhirsch.tumblr.com/post/6695 ... s-out-weak

Pasta Boss, Real Investment Advice weekend missive matches up with the Almanac for December. Lance is writing that the selloff happens every year because the funds need to rebalance positions and pay out gains/dividends to the holders. Apparently this year they were very low on cash so the selling was more obvious. Powell and Covid just added to it. Now we are in the phase where they are thinking about year end holdings snap shot for the quarterly reports. So yes Santa Rally has not been cancelled yet. I personally am thinking that the OPEX coming up where all those puts expire could, as it has several times this year, be the trigger. I have orange vertical lines at what should be OPEX and there is defiantly a tendency.

Options action has been much more significant than in the past. Certainly the free education on the internet from service sellers has increased my understanding of how the rules work. That and actually seeing how Softbank and others have used options to drive stock prices. But like we have always known, it isn't over till the fat lady sings.

cletus wrote:There was a 90% chance of a down year in tech based on the fact it posted back to back 40% annual gains. This still might come true. Moon cycles favor bears until just prior to the Santa Claus rally. The markets are predicting new lockdowns which have yet to be announced. Oil down $13, nat gas down $1, small caps approaching bear market. All point to new global lockdowns. We won’t bottom until those are announced, and the next couple of weeks could be among the worst ever in US history if tech is going to close down on the year.

i wonder if the market is also pricing war between russia and ukraine?

AAPL
Bad Apple
https://www.theverge.com/c/22807871/app ... e-pandemic