August position replacement
Overall sweeper activity was mixed on Wednesday. The flow had a bullish print in most of the session, then protection started to mix in throughout the afternoon. Most of the order flow Wednesday, especially the size, likely was August position replacement. Every round of buying that looked interesting, and multiple August positions in open interest are set to expire on Friday. What does that mean? Doesn't mean much of anything, not a bullish or bearish bias, so we can look for post-August expiration buying in any of this week's activity that may be interesting or confirmation.
On the sentiment front
On the sentiment front
We did get short-term sentiment with a bull signal into the close but just for day trading purposes, that doesn't do us much good. Interestingly, Put-Call ratios finished mixed with equity ratios showing call buying and indices seeing put buying.
Monthly expiration week living up to its reputation and algos front running in the gamma roll-off did come to fruition as well. Ideally, we would want some further weakness today, setting up a snap-back squeeze into next week.
Price action still could be pretty dicey today and Friday but if it is, there will be a solid setup off sentiment. Everything we are seeing this week could easily just be tied to expiration and gamma. If that's indeed the case, the unwind of all the hedging, protection, and shorting will likely follow by early to mid-next week. So if you are interested in playing for that "snap back squeeze", you will need to find an entry over the next couple of days.
But honestly, that doesn't make us feel any better about the overall market here. One of these pulls, inevitably, is going to be the start of an overdue correction. So we should not be looking to get too cute on anything swing-related until we get some sort of reset (either by price or by time) or institutional sweep buying miraculously finds a whole new batch of individuals. Otherwise, we don't feel the risk-reward is worth building positions in calls. In the meantime, there should be enough opportunities for intraday setups and even extremely tactical swing trades when things line up.
Unusual call volume detects
Monthly expiration week living up to its reputation and algos front running in the gamma roll-off did come to fruition as well. Ideally, we would want some further weakness today, setting up a snap-back squeeze into next week.
Price action still could be pretty dicey today and Friday but if it is, there will be a solid setup off sentiment. Everything we are seeing this week could easily just be tied to expiration and gamma. If that's indeed the case, the unwind of all the hedging, protection, and shorting will likely follow by early to mid-next week. So if you are interested in playing for that "snap back squeeze", you will need to find an entry over the next couple of days.
But honestly, that doesn't make us feel any better about the overall market here. One of these pulls, inevitably, is going to be the start of an overdue correction. So we should not be looking to get too cute on anything swing-related until we get some sort of reset (either by price or by time) or institutional sweep buying miraculously finds a whole new batch of individuals. Otherwise, we don't feel the risk-reward is worth building positions in calls. In the meantime, there should be enough opportunities for intraday setups and even extremely tactical swing trades when things line up.
Unusual call volume detects
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