SPY Put-Call Ratio – Both Bulls and Bears Dig In

The SPY Put-Call Ratio Dropped to Roughly Neutral Today on a Strong Rise in Open Interest

The SPY Put-Call Ratio Dropped to Roughly Neutral Today on a Strong Rise in Open Interest

SPY put and call volume both dropped today, though SPY put volume dropped a lot more–enough to bring the SPY put-call ratio back down from its upper Bollinger Band to its 20 dma.

The drop in the ratio happened on a strong rise in open interest. That means both bulls and bears were digging in today. These are perfect conditions for a triangle or similar consolidation.

SPY Put-Call Ratio Crashes Heading Into Opex Friday

The SPY Put-Call Ratio Crashed Its Bottom Bollinger Band Heading Into Opex Friday

The SPY Put-Call Ratio Crashed Its Bottom Bollinger Band Heading Into Opex Friday

As expected, the SPY put-call ratio crashed its bottom Bollinger Band today. You see this a lot on triple witching Thursdays.

The ratio closed at 0.96.  Heading into opex Friday, a move down in the ratio this strong away from the ratio’s 20 dma would tend to be bearish for the price tomorrow.

SPY put volume rose today by 61% on another strong rise in open interest.  SPY call volume rose by 190%.

The set-up is very similar to other triple witching Thursdays.  On those Thursdays, you tend to see either big moves up within trading ranges or small breakouts to a new high.  These moves trigger a lot of bullish sentiment.  You tend to see a strong rise in both open interest and SPY put and call volume.

But the move tends to be either the top before a significant dip, or it’s a breakout within a megaphone that will lead first to a dip, then a higher high, then a bigger dip, and so on.  When the triple witching Thursday move occurs within a megaphone, it can break out in either direction.

 

 

 

 

SPY Put-Call Ratio Falls Slightly

The SPY Put-Call Ratio Fell Slightly Heading into Triple Witching Thursday

The SPY Put-Call Ratio Fell Slightly Heading into Triple Witching Thursday

The SPY put-call ratio fell from 1.75 to 1.72 today on another good-sized rise in open interest.

SPY put volume rose by 13%. SPY call volume rose by 15%.

The SPY put-call ratio tends to fall to its bottom Bollinger Band on Thursdays of triple witching weeks, and the move tends to occur in the context of a price rally. Then the ratio tends to rise to close to its 20 dma on Friday.

The strongest price rallies tend to occur when the ratio has a longer way to go to its bottom Bollinger Band.  Nevertheless, tomorrow is likely to be a good day to buy the dip for a day.

SPY Put-Call Ratio Falls – Buy the Dip

The SPY Put-Call Ratio Dropped Below its 20 dma on Tuesday

The SPY Put-Call Ratio Dropped Below its 20 dma on Tuesday

The SPY put-call ratio dropped to 1.75 on Tuesday, which is below its 20 dma. This would usually be bearish for the price heading into Wednesday of opex week.

The drop in the ratio happened on a strong rise in open interest.  SPY put volume dropped by a modest 5%. SPY call volume rose by 7%.

One thing to keep in mind is that any dip tomorrow will probably get bought, as this is a triple witching week, and you tend to see melt-downs in the SPY put-call ratio on triple-witching Thursdays. This tends to happen in the context of a price rise.

Since the SPX is unlikely to fall enough tomorrow to reach its target of the March low, it is highly likely to be putting in a triangle here:

SPY Potential Triangle within Orange Falling Megaphone

SPY Potential Triangle within Orange Falling Megaphone

The potential triangle is forming within a potential falling megaphone (orange). The price would often get all the way to and through the orange falling megaphone bottom on its final wave down, but the move down can also peter out in the middle of the formation.

The failed breakout from the SPX ascending triangle gives a standard minimum target of taking out the March low.

SPY Put-Call Ratio Returns to 20 dma

The SPY Put-Call Ratio

The SPY Put-Call Ratio Returned to Its 20 dma on Monday

The SPY put-call ratio returned to its 20 dma on Monday, which means that the ratio is no help as an indicator for tomorrow.

The rise in the ratio happened on a large drop in open interest, which is now roughly in the middle of the normal range.

SPY put volume fell by 22%. SPY call volume fell by 37%.

One thing to keep in mind is that the ratio will usually fall to its lower Bollinger Band by the close on Thursday of triple witching weeks.  That often happens on a Thursday price rise.

SPY Put-Call Ratio Remains Unchanged on Another Rise in Open Interest

The SPY Put-Call Ratio Remained Unchanged Friday on Another Jump in Open Interest

The SPY Put-Call Ratio Remained Unchanged Friday on Another Jump in Open Interest

The SPY put-call ratio remained unchanged today on another rise in open interest, which is now high. The ratio remains well below its 20 dma, which would usually be bearish for price heading into opex week.

Usually you’d see a bearish move on opex Monday in this situation, but we have an FOMC meeting next week, so the move could be delayed.

SPY put volume rose on Friday by roughly 57%.  SPY call volume rose roughly the same.  Both bulls and bears are digging in, which means a good-sized move is likely.

One other thing to pay attention to is that June is a triple witching month.  The SPY put-call ratio tends to crash to its bottom Bollinger Band on Thursday of triple witching months, then rise to roughly its 20 dma on Friday.  That tends to happen in the context of a strong price rise on Thursday if the SPY put-call ratio isn’t already low going into Thursday.

SPY Put-Call Ratio Unchanged on Another Rise in Open Interest

The SPY Put-Call Ratio Closed Unchanged

The SPY Put-Call Ratio Closed Unchanged

The SPY put-call ratio closed unchanged on another rise in open interest. Both bulls and bears continue to dig in, and open interest is at the top of the normal range.

Both SPY put and call volume dropped a bit.

The CPCI and CPCE rose but are still well below their 20 dmas, as is the SPY put-call ratio. That’s bearish heading into opex week, but it’s still too early to be able to count on an immediate effect.

Don’t Expect Bulls to Give Up Easily Here

ES Needs to Return to Pink Megaphone VWAP for Critical Decision

ES Needs to Return to Pink Megaphone VWAP for Critical Decision

ES is forming a megaphone at the top of the pink megaphone on the chart. The pink megaphone requires a retrace to its VWAP at 2093.50 (June contract) / 2086 (September contract).

ES can reverse at that VWAP for a trip to the top of the blue megaphone, which would mean ES has completed the orange falling megaphone on the chart and will have no other retrace requirements if it continues moving down.

Or, ES can head down through that VWAP for a trip to the bottom of the pink megaphone to take out the March low.

ES is an overwhelming favorite to take out the March low because of the failed breakout from the ascending triangle it started forming back in February.

But bears shouldn’t expect bulls to give up easily here. The FOMC meeting is next week. Last night the SPY put-call ratio had fallen hard, and that’s bearish heading into opex week. And the CPC, CPCI and CPCE had all put in a big crash through their bottom Bollinger Bands.

Open interest in SPY puts and calls is at a very high level, so the move down when it comes should be big. But if you remember opex week in April, the SPY put-call ratio was very low the whole week and the bulls didn’t capitulate until Friday.

Patience may be required again.