Whenever the CBOE equity put/call ratio is over 1.0 on a Friday afternoon going into a three-day holiday weekend, I am on high alert. With the put/call ratio climbing over 1% today, the three-day weekend ahead, and the impact of dealers rolling put options at the end of today’s session, we could see the mother of all short-covering rallies before the close:
CBOE Put/Call Ration – Daily Chart
While I cannot speak for anyone else, the best position for the weekend is cash. Either long or short has risks depending on global tensions. If we were to see a retest of the 4211 January low, one might consider a small long call position. It could also make sense to position for a short-covering rally, which is why this wedge interests me at the 4430 Gamma peak.
The market is currently at 4330, the highest combined Gamma level today (combining the SPY and SPX options), also the WEM low on the futures contract.
S&P 500 Futures – Regular Session 5-Minute Chart
The S&P 500 Futures are wedging into 4330 and could see a short pop higher from here.
S&P 500 Futures 5-Minute Chart
The NASDAQ 100 (QQQ) is just a hair above its Weekly Expected Move low and a retest of its January low.
NASDAQ 100 Futures (QQQ) – Daily Chart
For the S&P 500, my preferred target is still the January low at 4211, but we don’t always get what we want.
S&P 500 Cash Index (SPY) Daily Chart
A.F. Thornton