We have a bit of predictability, if you may, with Max Pain coming into play.
I hate to bring it up so soon again, but this happens every month and comes into play a couple weeks before expiration.
Max Pain on the QQQ is 42, up a bit from 41 several days ago. The difference between 42 and 41 is nominal when eye-balling the open interest.
That suggests to me that we go down and break through 1934/1941 (touched twice) and bounce around 1890, which is a .382 Fib re-trace of the run from 1619 to 2328.
We've been bouncing off the NDX SRL lately, but this time it may be the COMPX Fib that does it, IMO, since the NDX SRL line is much lower than the NDX .382 fib. Especially when we're so close to expiration and have a very powerful tug-of-war going on between bulls, bears, and mo-mo traders.
How strong could a bounce be? Ignoring a logical Fib re-trace, I think we could venture to the 2030-2057 range, as that would allow us to land comfortable at 2010 (close to max pain QQQ 42) by expiration. With solid support at 1973-1985, we'd be nicely set up for some zig-zags to get us to where everyone gets screwed.
Just my 2-cents worth. With the narrow trading range, it appears Zeev is also settling into the long, strung-out bottoming process scenario over the next couple of months.
Fund tax-loss selling in October is one thing that can give us a good bookend to this several month period of distribution. It is scary not being bullish on the head-fake rallies we've been seeing (2182, 2105, 2103), but the V-shaped economic recovery is not even a U-shaped recovery. It's more like an L.
I'm not too experienced in the October tax loss phenomenon, but my recollection is that most of it is done by Oct. 20.
As the sellers want to get out before the stampede begins. Any insights into this? |
