Spotter of Brick Wall Sees Test of Floor Pending ~ The Risk Averse Alert

Monday, June 15, 2009

Spotter of Brick Wall Sees Test of Floor Pending

I thought it rather interesting that, on such a negative day as today there were more Call options traded on the CBOE than Puts...


Is there no fear of further selling in the stock market? Interesting. Might the floor at the OEX 415 strike be tested in a heartbeat?


As you see, both RSI and MACD weakened during the formation of waves iv and v of wave 3 (that is relative to waves ii and iii of 3, respectively). This is precisely as one would expect during the formation of a 5-wave Elliott impulse wave.

Therefore, too, expect both RSI and MACD to weaken during the present formation of wave 4, as well as during wave 5 to follow (that is relative to waves 2 and 3 respectively).

With this expectation in mind, then, as you can see, anticipated technical damage could come as soon as tomorrow. Thus, an extension of today's selling, taking the OEX to the vicinity of its 50-day moving average, appears an entirely reasonable probability.

OEX 5-min

Interesting how 5-minute RSI held up relatively better during this morning's collapse versus Friday morning's. Likewise interesting is how little the OEX recovered this afternoon, while at the same time RSI moved into balance. Another round of hard selling, stat, cannot be ruled out.

A brief remark concerning the trend on the CBOE...

One wonders how much of relatively pronounced Call buying over the past few months is coming from players who wish to be long equities, but only once they see this desire is shared by others. In other words, some significant portion of Call volume could be establishing positions buyers intend to execute ... on condition the market moves in their favor.

Smart, yes ... but not really all that bullish. Not exactly the mark of conviction coming from those more savvy players employing this measured strategy with an eye toward going long stocks...

Fast Money
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