Market Overview
The SPY is working on its 3rd consecutive close below the 21 EMA, which sits at 769.85 right now with price at 769.79 - basically sitting on top of it. The 8 EMA at 770.15 and the 21 EMA at 769.85 are converging with a spread of just 30 cents, so this is a real decision point. Today’s candle pushed up to 772.28 intraday but couldn’t hold it, and we look like we could be closing right at the line. The 50 day at 767.28 has been acting as a floor on the recent dips, which is constructive, but bulls need a clean close back above both the 8 and 21 today or tomorrow to flip this back in their favor. VIX at 17.9 is not screaming panic, but it’s not calm either.
The dominant theme in morning flow is heavyweight SPX bearish risk reversals, with two prints alone totaling over $150M in notional - that’s serious institutional hedging or outright directional bets to the downside through December. On the other side, there’s a competing bid in bullish SPX reversals and a notable QQQ call buy in near-dated Oct 30th strikes, suggesting some traders are fading the weakness short-term. The bear flow has the clear size advantage today, and it lines up with the chart struggling to reclaim the 21 EMA.
Some other interesting observations today:
Lots of UAL bullish action ahead of earnings and possibly in anticipation of some positive news with respect to Iran.
More bearish action in JBLU - this looks like a tail hedge for potential Chapter 11 proceedings. Note earnings are out soon too. That little calendar emoji in my flow database record indicates earnings within 5 sessions.
Lots of bullish trades in SOXX - clearly buyers looking for a re-bound in semis:
