Liquidity sources are drying up
On Friday, the S&P 500 in the last part of the session began to fall with some force. And today, we have seen that it has fallen and opened below the support zone at 4.998
The question we have to ask ourselves is: What does this mean? Does it mean it will continue to fall? Has a roof formed?
Last Friday, the options contracts expired. This meant the disappearance of the gamma, and meant the disappearance of a source of liquidity, that is, the money coming from the dealers to cover the positions they had open.
That money has disappeared, therefore, we must consider that a source of liquidity is missing.
Until we see how the gamma is situated, at what levels it stabilizes and what the behavior of investors is in the options market, it is reasonable to think that we will witness temporary fragility at least during the first days of this week.
And what does the chart tell us?
This morning it has pierced the support in the 4.998 zone. This is a symptom of weakness, of short-term fragility.
What 2 options are there?
If it now rebounds and is not able to exceed the 5.000 level, it will most likely deploy a new downward leg.
And if it rebounds, and moves sideways above 5.000, it is most likely that the price will try to return to the high zone.
Now, 5.050 is a wall. It was already before the expiration of the options contracts, and it is even more so now. Therefore, maximum rise is in the 5.050 zone.
If it fails to break above 5.000, we have support between 4.941 and 4.922
As long as the S&P 500 remains above that level, I will maintain a bullish bias.
The question we have to ask ourselves is: What does this mean? Does it mean it will continue to fall? Has a roof formed?
Last Friday, the options contracts expired. This meant the disappearance of the gamma, and meant the disappearance of a source of liquidity, that is, the money coming from the dealers to cover the positions they had open.
That money has disappeared, therefore, we must consider that a source of liquidity is missing.
Until we see how the gamma is situated, at what levels it stabilizes and what the behavior of investors is in the options market, it is reasonable to think that we will witness temporary fragility at least during the first days of this week.
And what does the chart tell us?
This morning it has pierced the support in the 4.998 zone. This is a symptom of weakness, of short-term fragility.
What 2 options are there?
If it now rebounds and is not able to exceed the 5.000 level, it will most likely deploy a new downward leg.
And if it rebounds, and moves sideways above 5.000, it is most likely that the price will try to return to the high zone.
Now, 5.050 is a wall. It was already before the expiration of the options contracts, and it is even more so now. Therefore, maximum rise is in the 5.050 zone.
If it fails to break above 5.000, we have support between 4.941 and 4.922
As long as the S&P 500 remains above that level, I will maintain a bullish bias.
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