Yesterday was the largest SOS day I can ever remember seeing by far. Crazy! More and more sentiment indicators are at 2014 or even bull market extremes. None of this precludes higher prices but another significant pullback is coming due.
Most significant downtrends have started with a 5-10 day drop in the 70-80pt range. The last one was 8-9 days and about 90pts before bouncing around a few days and then collapsing. From the 2030s, that makes 1950-1970 a target area. I have mentioned for months the price-volume in the 1960s. Max option pain for Nov 22 OPEX is now around SPX 1960-1970 (not sure if I misread 1980 last week or if it dropped a little). The likely minimum Fib 23-38% retracement of 1820 is near 1950-1970.
An OPEX runaway to the upside is possible for the next 2 weeks but I won't consider that likely given sentiment, divergences and overbought technicals unless SPX can stay near highs into Nov 17th. The likelier scenario seems to be a top between now and Tuesday followed by a drop to 1950-1970. SPX could then consolidate below 2000 at max pain into Nov 22 OPEX, but if the drop comes quickly enough it could make 2 legs down as far as 1900ish before bouncing back into max pain. Regardless of path, I favor SPX settling into max pain again on Nov 22nd probably near 1970-1980 but we'll need to keep our eye on the somewhat fluid max pain level. I'll be gone a few days. Good fortune.
Solid work but you make one consistent error in your thinking. Max pain rarely occurs. It's the single most over rated vehicle used in market playing. Broken clocks do happen twice a day and thus yes, max pain works on rare occasions but in truth, hardly ever. That said, solid work otherwise.
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