One again Happy New Year.
As you can see prices really did probe lower during the later part of last week. I imagine technical indicators became over sold. Currently prices are rebounding in what looks to be a second leg up after making an initial low at 11428.5 on Thursday and then moving down to 11431 overnight. There was some activity in Feb. 114 puts with one firm shorting about 5K on Thursday, there was some decent buying of Feb. 114.5 puts. Same story in Mar. there was selling in Mar. 115.5 puts and looked to be buyers of Mar. 114’s. Over all volumes were low. On the call side of the ledger Feb. calls traded 19K on Thursday and the Mar. calls traded around 14K. It does seem as though an interim move higher could continue. But as the weekly bond chart below reminds, we are on the right side of a rather significant H&S top and therefore a number of people will be playing for a continued move down. Keeping ones eye on the prize in terms of over all price direction, merits a core short position.
For the short term outlook, take note of the following, keeping in mind we have come off rather significantly and may have completed a series of moves down, which may allow some retracement higher.
For the longer term outlook keep this picture in mind.
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