In Friday's update Dale explains the SPY long term weakness to downside is still in place but in lower timeframes there was room for moves in either direction. The short term timeframes Thursday clearly indicated the upside potential on SPY that came about. Even during the rally on Friday there were short term trades to downside on SPY that yielded 100% gains.
In this update from Dale Wheatley he discusses the upside divergence taking place in SPY and others and then explores the available out of the money options. Compared to the huge gains available earlier in the week on puts options, spectacular gains were thin on the ground. 2 to 4 times your money only.
Some VXX downside divergence in latter part of Friday but not overly clear. GS had decent daily divergences to the upside still on going the XLF had a series of 60 minute divergences in play earlier in the week
In the Options Hunter nightly update on Monday October 8, 2018 Dale shows the clear divergence apparent on the VXX and the multiple reentry points that occurred.
TWEET 10:39am "For short term traders of SPY for expiry today, the VXX 2 min chart had a perfect “W” price & upside divergence at 10:06 today & SPY has the exact opposite pattern! That’s what I teach & the put options entry point was at the 2nd price top @ 10:06, when the divergence was there!"
Tweet 10:50am "The SPY 288 puts were up 4X(300%) from 10:06-10:36, just 30 mins time, due to the perfect validation from VXX! 287.5 & 287 puts also up about the same %!:
TWEET 11:30am "Did you notice the 5 min VXX pattern again at 11:30? Note how many of those high flying stocks like AMZN, FB, AAPL, NVDA, etc had patterns to validate the moves in SPY & QQQ indexes. Once again today, SPY puts were up 500%+ from 11:30-Noon! This is exactly what I explained before"
More MACD divergences on lower time frames were apparent this week on NFLX major moves Monday into Tuesday. Then Thursday 10 min divergence to upside reentry 3c to 10c OTM calls moved up to $3. SPY displayed a similar pattern. OTM calls went from 11c to 80c.
In many of our nightly updates we talk about the inverse relationship between the VXX, an ETF proxy for the Volatility Index and the market proxy SPY. A divergent MACD up or down in either frequently coincide with the opposite divergence in the other. As you can see from this overlay chart, the two ticker do indeed inverse each other.
The hourly chart of SPY is overlaid with the hourly chart of VXX, notice the double top in VXX at the same time as the double bottom in SPY
VXX had an MACD divergence to upside on August 9, 2018 at 3pm, out of the money options rose sharply before end of the day and this continued into next morning. This occurred on lower time frames so the move would be short term. SPY showed the opposite pattern as expected with OTM SPY 284 puts went to from 7c to $1.22.
A clearly defined double top with MACD divergence on VXX on hourly charts occurred over 3 days through to 8/2/18. As we know the SPY had the opposite divergence and gave us an opportunity to trade OTM options. The trade length is determined by the length of the divergence pattern, 3 days.
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