I'm Back! Just in Time for OPEX Week

At the end of every update, I bring everything together summarizing my view on the market using the information here, while also considering research from bulge bracket banks which I read on a regular basis.

Last week I was on vacation so updates were shorter or not daily, but before I left, I said dips would be bought ahead of OPEX as SPY 0.00%↑ targets $630. Still on course for this strategy and index action continues to be quite boring, though there has been a lot of movement under the surface. VIXperation is this Wednesday and OPEX is Friday. Thursday is the first day we could see weakness although it usually starts Friday as folks hedge ahead of earnings. CPI is Tuesday and Wednesday is PPI. I consider all inflation reports a risk going forward as inflation should get progressively hotter into September. The PCE report on 7/31 carries the most risk since it is the Fed’s preferred measure of inflation.

Index Models (Based on Option Flows)

Note: Red zone is bearish where investors should sell positions, green zone is bullish where investors should accumulate positions (neutral = coin toss). Signals in the index models drive the bias for single stock positions (i.e., if index models are bearish, going long a single stock within the index isn’t smart regardless of the underlying signal).

Worth noting how my models define bearish and bullish. Bullish is better than historically average returns for the underlying and bearish is below average returns. Key point: bearish does not necessarily mean negative returns are expected, but if they do occur, they are most likely to occur when the model is bearish.

S&P 500 SPY 0.00%↑ 5 Trading Day (TD) Risk Model

Current Signal: Slightly Bearish

S&P 500 SPY 0.00%↑ 15 TD Risk Model