2/17 $SPX $SPY $ES_F Analysis

Adapted from Substack — https://linktr.ee/Eccavine

After leaving the gap below spanning 2 trading periods, $SPY finally covered the lower today, first bouncing on that initial support. As the day closed, increased sell side volume struck, denoted in Figure 2 — Raindrop, 1D. Figure 1 — $SPY — Candlestick, 65m, denotes the lightly structured symmetrical triangle arm of would could be — a head and shoulders formation.

Figure 2, again, is the raindrop chart denoting the first and last half of the trading period (2/17). As we can see in the candle, volume was highest at the volume weighted average price for the first half of the day, where volume was highest below the volume weighted average price in the later half of the day (bearish in structure). Overall, we could say that this candle is moderately bearish leaning, though the selling pressure came at most in anticipation of close before MOPEX, or, monthly options expiration date (2/18).

Though the close was significantly bearish, I am leaning contrarian for open, such that aggressive put buying and opening at the $440 strike level (just inside the money at the close underlying stock price) would give rise to buying pressure enough to allow dealers of the contracts’ gamma to cover an easier payout.

The figure shows that much of the puts are still below strike price, though the coverage of the 442.5 level would alleviate much of the payout pressure that passed hands today (as far as assumed buy — at or above ask price — flow is concerned).

Applying the contrarian point of view, an overwhelming amount of bears are in one corner from the close of today. The trading period — 2/16 — allowed for the same contrarian success in $VIX options expiration, saturated on the call side, after a moderately bearish week open such that $SPY was forced upwards in order to stretch $VIX outside of the saturated portions of calls.

For this reason, I entered $SPY $443 lottery tickets at close with a 2/18 date attached at an average of .53 / contract. The amount vested I don’t necessarily care to lose, much the reason they are lottos, and I intend to hold them through at least 441 if a bullish setup is there to open. As gaps day-to-day typically fill (Figure 1), we did leave a sizable gap above in the descent this morning — approximately 443–446, which could be covered as early as tomorrow, though I would not expect such a move prior to or at open with the headlines as of current.

I would like to remind everyone that I am still bearish for the moderate term, and have no bullish ideology to back a rationale for why $SPY should be bullish with the current market breadth and bearish headlines, and that I am solely making my hypothesis on the surround of monthly options expiration, options gamma dealt by market makers, flow, and some technicals which attribute.

$SPY put to call ratio closed at a staggering 3.04 — where assumed buy side flow held 93.5 Million in premiums to the Put side vs. 30.8 Million in premiums to the Call side. Assumed sell side flow measured in with 95.5 Million in premiums to the put side (bullish in the case of sells), and 28.9 Million in Call sells (bearish in the case of sells).

Options flow after the bell on the buy side was unanimously bearish — though I will include it for your convenience below.

To give a better overview of my contrarian hypothesis and where the money is related to the heat map — I’m posting the heat map from Blackboxstocks below, where P0, C0 denotes options expiring this week at a specific strike price, C1 and P1 the subsequent week, and C2/P1 the following week.

As per the heat map — it is safe to say that 437–441 would make little difference for options sellers to straddle alongside, though it would make be problematic to close below the $432 strike price. However, 436 begins to show areas of necessary support, and areas 442 and above could be problematic on the call side — which is where I think spy will close, at the very least, if not — range much of the entire trading period. Best case scenario to allow this would be an open at least 10 points above the 438 level relative to $SPX.

At the time of writing, $ES_F is exactly at 4377.25, up 0.6% and much unchanged since close. (7:19 EST). At current levels of the E-Mini S&P 500, we are just below the trendily for a symmetrical triangle, though no rash bearish movement has yet to occur. Points of concern below are 4350–4355, as well as 4300 for the longer term, while points above are just outside of 4525 to break the most recent downtrend.

As the levels below are very close to impact, I will discuss more of what to look for in the event of an upward move in the morning. An open above 4400 would be a relatively bullish case, as areas of previous resistance and support have been defined there, and likewise this is a massive dark-pool level available on the dark-pool volume profile provided by blackboxstocks.

I will provide more market analysis both in the public telegram, linked into my twitter bio, as well as in the premium substack future, with which can be subscribed to. In subsequent analyses for 2/17 I will cover interesting earnings movers of the day and tomorrow, cryptocurrency movers, as well as $NQ and longer term market strategy in the current market choppiness.

As always, resources and discounts are available in the link in my twitter bio for BlackboxStocks, TrendSpider, and Whalestream, all of which I use as services in my routine technical analysis — as well as the link to the free telegram and other accounts I may have or post on.

23. 2x Ole Miss Grad. Theoretical Chemist turned Financial Analyst. Legal Studies in Securities and Financial Technology. Chartist.

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Ethan Caviness

Ethan Caviness

23. 2x Ole Miss Grad. Theoretical Chemist turned Financial Analyst. Legal Studies in Securities and Financial Technology. Chartist.

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