HomeOptionFlowOptionFlow-reportsSPY – AAPL – USO – GLD 3-5-16
SPY

As you might know the development of my indicators is a derivative of Scott Carney’s Harmonic patterns, and ultimately the Gartley pattern, developed by Harold McKinley Gartley back in the 30’s.

For traders, who are unknown to these patterns, I would recommend Carney’s books, in which he describes several patterns, with specific Fibonacci ratios defining the XA and BC projections/retracements.

I always keep a document handy with the specific patterns, you can download it here in PDF file format.

The reason I’m bringing this to your attention is that we’ve seen a potential Harmonic pattern forming on the daily SPY, since we’ve mentioned the 61.8%XA target back on the 15th of February. If you’ve been following my posts you know I have referred to this a couple of times in the past weeks. Now in hindsight you see that during this time our bias was bullish, and have been looking for bullish patterns on smaller 5-15min TimeFrames.

Let’s have a look again at the daily chart :

SPY-3-5-16-daily

Now that the 61.8%XA objective has been achieved on the daily chart, we need to re-evaluate our longterm bias.

However, if you look at the PDF file you see that none of the depicted patterns have a 61.8%XA projection at their PRZ (Potential Reversal Zones). From this point forward (assuming that the current pattern formation will conclude in one of the Harmonic patterns) the first probable pattern is the BAT. With the current pattern depicted on the daily chart, we see that the B point at 44% is close to a required 38.2%XA retracement, and the C point is close enough to the required 88.6%AB retracement. So for this pattern to play out, we’d need to see the CD leg finish around the 88.6% projection of XA.

By the way, in order to “qualify” a specific bar to be at a Fibonacci level, instead of looking at the high or the low to be at the Fib level, my definition (a little more lenient) is that the bar has to embody the Fib level. which indeed is the case for both the B and C bars.

In that case SPY has another 8 points to go. And this would also be inline with a 200% projection of BC.

Having said that, we need to acknowledge that the current level is strong resistance. Demark’s sell setup is at a bar8. So the Demark traders will observe a daily bar, Monday, that will have a close higher then the close of 3/1 bar, for a potential sell setup.

Since Friday’s high was inline with the close of the 1/5/16 bar (the gap), I’ve drawn in this level together with the high of the 1/15 bar. Above that we could get a gap fill to the 12/31/15 bar. So will it erase all of the 2016 losses, and get back to the close of last year?

Look how that 12/31/15 bar was our final entry alert for a possible leg down. the 78.6%XA is right inline with it. So between 199.96 (the 61.8%XA) and 201.9 (the 1/5/16 high) I’ll be neutral.

On the 15min chart we see a possibility of a new pattern forming with an entry at 200.26. Use the calculator to find out where the PRZ is.

SPY-3-5-16-15min

Over the past weeks we have seen two instances where the @gr8estbot alerted us in advance of continued bullish movement: on Feb 25 we saw some $15million dollars in Calls being bought, and on the pullback at the end of the day of the the 29th, we saw almost $6million dollars in Calls being bought, all in few minutes. Not only on the SPY but also on other index ETF’s such as the IWM

So for future reference; these are the type of events we look for.

AAPL

We alerted that large call buy trades were being detected in AAPL at the Low Of Day on Thursday 3/3/16. Even on Friday, Call buying into next week’s exp. continued (see below for AAPL’s optionflow for next week as detected on Friday). Let’s have a look at the charts:

30min

is extended, and broke above the 161.8%XA

AAPL-3-5-16-30min

Daily:

Just below the 127%XA, if it breaks above we can see a move to 107.2, the 161.8%XA

AAPL-3-5-16-DAILY

We’ll watch it during market hours for BullPRZ’s on the shorter TimeFrames.

USO

Although the optionflow is bullish on the “large” trades for next week, the volume on the options is low; we’ve only seen three buy trades of over $15k for next week; all calls:

OF-USO-3-5-16

The daily chart looks very interesting:

It closed just above an AB=CD PRZ, with XA projections as possible targets, as long as it holds above the PRZ

USO-3-5-16-DAILY

 

GLD

Another one we alerted of some large call buying last week was GLD, simply following the alerts resulted in some 150% return trades.

Here are the large trades filtered out for next weeks exp.

OF-GLD-3-5-16

The daily chart shows how GLD stalled out Friday just shy of the 161.8%XA, which occurred in an AB=CD pattern on the 15min chart.

EOD it closed right at the PRZ. Below the PRZ, and observe the XA retrace levels, or a bounce out of the PRZ to maybe challenge the highs.

I don’t trade GLD much, but just like SPY and USO also at a somewhat crucial level.

 

 

 

Optionflow for next week:

OF-3-5-16

 

OF-3-5-16-SPY

 

OF-3-5-16-AAPL

 

 

 

 

 

 

 

 

 


Comments

SPY – AAPL – USO – GLD 3-5-16 — 6 Comments

    • You don’t. You’ll never know for sure what the trader’s objective is behind the trade. But by filtering out the trades that were at or above the ask, we can assume that these were “buy” trades, and not “sells”. Thereby exposing a bias. Whether its a hedge or not imo is of lesser importance. An option hedge is a shortterm protection against a longterm investment. Since we only look at front end and next week exp. Then a “hedge” trade of this nature, would have to be a substantial fear that the market will move in the direction of the option trade, at least short term.

  1. Thank you Peter. Lastly, would you kindly explain the importance of “at or above the ask”? Why would anyone pay more than the ask?

    • To make sure they get a fill. On SPY the spread is thin, usually no more then a penny or two. So buying at the ask or maybe a penny higher gets you a better chance for a fill. Supply and demand, you want something bad enough you pay the asking price. Weekly options move very fast, by the time you push the buy button, it might have moved a penny already.

    • Not only that, you see that these large trades are sometimes tens of thousands of contracts, not that I have experience placing these kinds of trades (wish I did), but you can imagine for those trades to complete, you need to be at the ask side of the trade.

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