Market Blast - March 6, 2023 - Explosive Options

The Fuse

Futures are slightly lower before the open as market players digest the big moves seen last week. That reversal of fortune from mid Thursday through Friday was a wakeup call to the bears. Strong internals stoked the heavy buying pressure, the algos kicked in as well and closed the markets near the highs of the session for the second straight day. However, we have a big week of news to parse through and that may create a bit of volatility. VIX is already slightly higher this morning.

After last week’s surge the 4100 level on the SPX 500 could be the next target. Oscillators are modestly lower here but a flip to positive today could mean more upside to that target. The Industrials had a strong finish last week, 33,700 is the next area of resistance.

Not much news overnight, European retail sales were weak while Swiss inflation was hotter than expected.

Ciena is out with strong earnings this morning, up 10%. We will hear tonight from Nutanix, Trip.com, Dave and Buster’s, and WW. Tomorrow we’ll have Dick’s, Crowdstrike, Thor and a few others.

Testimony by Jay Powell on Tuesday in the Senate, we’ll see what he has to say about inflation and the economy. Jobs data will be the theme for most of the week.

Breadth was spectacular on Friday, a near 4-1 rout of up vs down. This puts this indicator on a buy signal.

Some would say volume has been soft the last couple of days, but remember it’s always first about the price action. If we see big volume to the upside and less follow through, the bulls who bought end up trapped. We like to see a market climbing the wall of worry. When everyone is bullish and ‘knows’ it, then we look for a quick exit.

Support is very strong now at 3925-3940. We could see a run to recent highs around 4200 or so, but the market short term is getting rather extended.

The Internals (click chart to open in a new window)

What’s it mean?

Market internals were strong all day long, the VIX closed very low and nearly broke 18%, as low as it’s been in over a year. Notice the ticks were green most of the day, a Friday where many buyers came strong at the market after Thursday’s powerful reversal. VOLD was jammed higher into the close, the TRIN down sharply while the ADSPD showed a strong trend up day.