From the Daily Options Report by Adam Warner.
He discusses the price action in SP500 over the last two weeks. There has been a price change that has happened only six times since 1990 and four times something else has happened afterward. Just from a quick and dirty statistical point of view, if something has happened four times out of six, the error is plus or minus two. So I think of that “four times” as really “two to six times”. That changes the strength of the conclusion for me.
Pretty rare occurrence this week, via Dr. Brett.
We had a 10-day closing high on Friday in the S&P 500 Index (SPY) followed by a 10-day closing low on Monday. It turns out that this is an unusual reversal. Since 1990 (N = 4895 trading days), there have only been six occasions in which this has occurred.
While six occasions is hardly a sample from which we can build a robust analysis, it’s worth noting that the market was down subsequently on a five and ten day basis on four of the six occasions by averages of -.22% and -.76% respectively.
It also speaks again to the utter lack of volatility in recent days. Really on two levels. You could see low daily volatility, but if it moves in one direction, the net effect is that if you just sat with a short gamma position, you would do poorly as the stock gradually moved away from the strike(s) you are short. So this goes beyond that. Not only did we see small ranges, but they offset each other for a full two weeks.
0 Responses
Stay in touch with the conversation, subscribe to the RSS feed for comments on this post.