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Coming Out Of Expirations

6/25/2014 5:58:32 AM

Good morning Traders,

Tuesday saw some program selling coming into the market. The problem is, there was a lot of selling which suggests there are many betting on more selling here. And as you know, when everyone bets in one direction, the market tends to do the alternative.

That doesn't mean we're not working on a top, it's just a process that has to play out. Let's take a look at how our forecast from last year is playing out:

SPY Forecasting Model Chart

As you can see, our model is suggesting a move higher into July. Now a look at our cycles:

2014 10/20/40 Weeks Cycles and Seasonality Chart

The 10/1 20 week cycle low is the next big focus cycle date, given the lack of a 9 month cycle low. It's pretty common to have a low within this period. So the market, cycles and forecast are all pointing towards a move lower playing out over the next 4 months...

Looking at oil very quickly, as our call options performed very nicely - if the stock market sells off, it'll likely take oil with it:

USO/OIL: Put/Call Ratio and Open Interest Chart

This just shows the 1 month future returns tend to be negative when traders bet too heavily on call options...

As for the Qs, this positioning could be very bearish...

QQQ Timing Indicator Chart

And back to the barometer:

Daily Stock Barometer QQQ Trader - primary System Chart

I think conditions are ripe for positioning in covered calls and stock put options over the next month as we work through this overbought market. Expect some trades in our services over the weekend.



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