S&P 500: Options Expiration Week Could Provide a Buying Opportunity
2023.08.16 10:31
has two open gaps: one near 444 (formed on 7/12) and one near 454 (formed on 8/2) (shaded in light pink). SPY is testing the 444 gaps on relative light volume, suggesting support. Last Friday’s (8/4) close produced a 1.79 TRIN and -414 Tick, which is a bullish combination that suggests a low in the market is near.
On August 9, the TRIN closed at 1.17 and ticked at -208, and today, the TRIN closed at 1.25 and ticks at -294, an additional bullish combination that adds to the bullish setup. The second window up from the bottom is the , which usually trades opposite of the SPY.
Over the last week, the SPY and the VIX moved lower, a bullish short-term divergence. I could see a “back and forth” for a couple of days before the 454 SPY gap level may be tested. Options expiration week is this week, which has a bullish bias—long SPX on 8/9/23 at 4467.71.
The bottom window is the SPY, and the next higher window is the 3-day SPY/VIX ratio average. We boxed in the times when a divergence was present. Currently, we have the SPY making a higher low than early July and the SPY/VIX ratio making a lower low, suggesting a lower SPY is possible in the coming weeks if the SPY does bounce (we think it will).
This week is options expiration week, which usually has a bullish bias, and a bounce is possible. However, we could see the pullback resume next week because of the negative divergence in the SPY/VIX ratio.
- Monitoring purposes: Long SPX 8/9/23 at 4467.71.
- Long SPX on 2/6/23 at 4110.98; Sold 6/16/23 at 4409.59 = gain of 7.26%. Gain since 12/20/22=17.68%
- Monitoring purposes GOLD: Long GDX (NYSE:) on 10/9/20 at 40.78.
