Monday, March 7, 2016

Brief Update on SPY and Trade Set-Ups 3-7-16

Over the weekend I ran some scans looking at historical reward and risk in SPY relative to some possible technical and sentiment backdrop data which may occur as this rally continues.

Currently the total put/call ratio is showing some complacency in the short term relative to the longer trend.  Coupled with overbought stochastics, and bearish long term moving average configuration, that stats I looked at suggested a good reward to risk opportunity would be in place for a short position or inverse ETF position in SPY.  In this case, the best reward to risk ratios seemed to occur with a 2-3 month holding period.

So this is something I am watching and will update here.  I think it would be ideal for stocks to rally further towards the 200 day moving average at which point program trades may kick in and provide some volatility to take advantage of.

Click on Chart to Enlarge

The chart here shows the total put/call ratio in a configuration I have showed many times.  The 5 day average is low relative to the bollinger bands which typically shows a market which is ready to pull back, though not necessarily immediately.

Click on the Chart to Enlarge

Also the 5 day average is low relative to the 63 day average.  And in the context of a longer term moving average downtrend in prices (50 ma< 200ma), this would seem to indicate a notable real money sentiment point which could mark the approximate top of a counter trend rally.   Again I will keep an eye on this and run some factual scans based on the data this week.


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