As a follow-up to Friday’s OpEx Ramps & Fades + QQQ & SPY Key Support Levels post, it appears likely that the OpEx ramp (i.e.- the historical pattern of the stock market moving higher into standard options expiration) may have peaked with the roughly equal highs on Monday & Tuesday of this week following Friday’s OpEx. As highlighted in the video that accompanied that post, the post-OpEx ramp “fade” (correction) typically starts anywhere from the day after OpEx up until about a week or so later, often within a few days of OpEx.
While swing trading the broad market tracking ETFs or futures for anything more than a quick trade lasting no more than a few days has proved futile for months now, sooner than later this market is going to break out of the recent sideways trading range & pick a trend. As of now, at least by my interpretation, the technicals still very much favor a downside resolution. While I’d still prefer to wait to see those key support levels on all the major indexes taken out before adding an official short trade on any of the broad market tracking ETF’s, I will say that I think a short entry here with a stop above yesterday’s highs does seem objective & certainly offers a very attractive R/R will minimal downside if stopped out, yet the potential for above average gains, should the markets go on to break below those critical support levels that were highlighted last week.
For those preferring to trade the broad markets, I think that QQQ & IWM are likely to outperform SPY on the downside, should the market correct, as the SPY is more diversified with many defensive & dividend stocks. For those preferring to trade sector ETFs, I plan to follow up with some of the other sectors that stand out as either bullish or bearish trading opps.