We accurately predicted the current correction two weeks ago, but we couldn't have foreseen how anemic it has been! Remember, we can use signals to predict direction, but we can't usually predict depth or length of a direction.
Supporting the anemic nature of the correction is VIX-VVIX divergence (Tradingview free isn't letting me show my drawings on the secondary panes, so you'll just have to look at it yourself). But this type of divergence has a 4/4 recent history of predicting both local bottoms and tops, including the current top.
Multiple supporting signals support an S&P 500 reversal around 3820: (1) trend line convergence; (2) key fib level; (3) VIX-VVIX divergence and (4) max pain theory. Max pain theory states that related index SPY will converge to the level causing the most pain for options holders (calls and puts). Right now, that level is near 3820, so it wouldn't be shocking to see that level around Wednesdays option expiration day. SPY has done a good job of converging to max pain levels in cycles past. Another somewhat related signal suggesting bullish action in the near future is my 10 Year Rates analysis (linked) which - 2 weeks ago - was suggesting a correction and is now suggesting bullish sentiment. I will be buying April call options with a 3900 strike when my 3820-Zone target is achieved assuming these trends in related assets hold.
Of course, max pain is dynamic (it was 3800 on Friday), so by Friday 2/26, max pain level could be significantly higher.
See below:
swaggystocks.com/das...options-max-pain/SPY
Supporting the anemic nature of the correction is VIX-VVIX divergence (Tradingview free isn't letting me show my drawings on the secondary panes, so you'll just have to look at it yourself). But this type of divergence has a 4/4 recent history of predicting both local bottoms and tops, including the current top.
Multiple supporting signals support an S&P 500 reversal around 3820: (1) trend line convergence; (2) key fib level; (3) VIX-VVIX divergence and (4) max pain theory. Max pain theory states that related index SPY will converge to the level causing the most pain for options holders (calls and puts). Right now, that level is near 3820, so it wouldn't be shocking to see that level around Wednesdays option expiration day. SPY has done a good job of converging to max pain levels in cycles past. Another somewhat related signal suggesting bullish action in the near future is my 10 Year Rates analysis (linked) which - 2 weeks ago - was suggesting a correction and is now suggesting bullish sentiment. I will be buying April call options with a 3900 strike when my 3820-Zone target is achieved assuming these trends in related assets hold.
Of course, max pain is dynamic (it was 3800 on Friday), so by Friday 2/26, max pain level could be significantly higher.
See below:
swaggystocks.com/das...options-max-pain/SPY
Trade active:
Trade active from 3820
Comment:
Interestingly, max pain for Wed expiry options is now around 3900.
Trade active:
Interesting failed breakout / round trip. Will watch closely.
Trade closed manually:
3970 seems pretty toppy for now. April 01 3900 call options purchased on the first trip to 3820 would've made about 25% ROI.
