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Market View Update (9/13/08)

(2008-09-13 18:41:39) 下一个

 A explanation about high call volume of  SPX on Friday:
       The high call volume of SPX  on Friday is  suspicious at this critial time.   Because most of those calls are bought shortly after market open.  ( > 41,000 calls out of 68,000)  And it was too far off the money  to make any money for a call contract which will expire in a week.   So this is most likely  insititution investors'  action to hedge their heavy short position.

      After checking SPY,  I found the Max Pain of SPY is currently located at 1200. And second to it is  1250. This make a lot of  sense. The SPX still has good chance to revisit 1200 next week.

Some of supporting points:
1.  SPY  has a raising wedge with declined volume in past three days which is bearish.
2.  Used to be leading sector Tech sector is continuiously weakening. The lead stocks in tech sector AAPL, RIMM, GOOG are all under or near the critial support level.
3.  The strongest sector in past 4 weeks RUT can not break above strong resistance around 760.
4.  Retail and Home builder sectors are also at strong resistance level.
5.  The last resort of Investment bank GS just closed below ascending long term trend line. This is significant.  Because this is the first time for GS weekly closed below long term trend line. If GS ER or outlook is not good  ( GS will report ER Tuesday before market open) that will cause another sell off in financials and push market lower.
6.  VIX still remains high at 25. 66  The fear of market falling is not relieved at all.
7.  SPX  tested 7/15 low twice within a week. ( 9/5 1217 and 9/11 1211 ) This shows the strong market intension to test 1200 and to create a new low.
8. SPX can not break and stay above critical support level around 1263-1270 three days in a row and weekly closed below it.
9. Too many "Experts" called bottom and many has been expecting a big rally in the market.
10. LEH's uncertainty.  If LEH has a deal on Monday, market could have a rally for short term, if not, big down wave is expected.

Combining all of above, I don't see a rosy picture of the market, just opposite of it. There is no reason to be optimistic at this juncture.  Be aware the potential risks.

Don't  be cautht without guard.

JMHO

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阅读 ()评论 (12)
评论
drywall 回复 悄悄话 回复wavePlayer的评论:
Now the question is, how deep the market can plunge? Is today going to be a short-term bottom? Looks like there is strong support there.
nostrange 回复 悄悄话 高手啊,由衷地佩服!
wavePlayer 回复 悄悄话 回复drywall的评论: You will make a lot of money. I have SPY put bought on Friday. Cheers!
drywall 回复 悄悄话 回复waveplayer的评论:
Thank you for your explaination about how to caculate max pain. I still have some Sep's put of QQQQ, it's under the water, hopefully I can get out before OE.
waveplayer 回复 悄悄话 回复drywall的评论:Yes, you are right. I just checked it on the website, it shows the MAX-Pain is 129 but it's wrong.
Max-Pain calculation is pretty easy. You just add up all calls and puts for each strick price, the highest total number is Max-Pain-Point. You can check Yahoo/financials it has same number as CBOE. In this case SPY Sep. 120 puts: 274,797 and calls:19,983 total:294,780
SPY 129 puts:52,014 and calls: 68672, total: 120,686
which is way lower than SPY 120. So SPY 120 is Max-Pain

For any number on website, you need to verify it before trust. Otherwise, you may be misleaded.

In addition, the Max-Pain is a moving target, so it will be more reliable when it is close to expiration day.

Take care.
drywall 回复 悄悄话 回复wavePlayer的评论:
I GOT THE SAME THING(129) FROM THIS WEBSITE:
http://www.optionpain.com/MaxPain/Max-Pain.php
wavePlayer 回复 悄悄话 回复funfunfun01的评论:if you check the number, you will see 129 is the least possible strik price to be Max Pain.
wavePlayer 回复 悄悄话 回复funfunfun01的评论:I don't know how you calculate it.
and where you got data. let's do the numbers: SPY
120: total 295K
121: 212K
125: 214K
129: 120K
130: 195K
which one is Max Pain?
xiaoliangou 回复 悄悄话 谢谢WavePlayer的市场分析!
太具有指导性了!

mojoe 回复 悄悄话 Great analysis! Thank you!
funfunfun01 回复 悄悄话 max pain is wrongly calculated. spy is 129 for now.
drywall 回复 悄悄话 GREAT JOB! THANKS A LOT!
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