Do Bulls Have One More Catalyst This Week?

With the BOJ and FOMC out of the way, the known volatility events are behind us, however could one more catalyst show up for bulls before the end of the week as options markets prepare for March expiry? Markets rejoiced after the "dovish pause" from the Fed today as the SPY managed to carve out a 1.09% gain on the day however the closing price action was less than stellar as a good chunk of the gains were given back in the final hour. Despite the rally, we failed to close above several key technical levels which would have greatly announced to market participants that bulls mean business on this relief bounce.

SPY failed to close above the macro trendline as well as the Key $570 level by end of day

The failure to close above the macro trendline as well as neither this or last Monday's high means that we still have a bearish inside bar to the breakdown candle on 3/10. Yes, we can always do so by end of week but not doing so after a plethora of hedges came off due to today's event volatility seems like a bit of a letdown, especially now that there are no other catalysts to help price break out this week. Or is there? The options market may be hinting of a possible catalyst, perhaps one that only those in-the-know are privy to. For this Friday we can see here that dealers largest area of exposure is to short OTM puts on $580 SPY, $490 QQQ, and $215 IWM respectively. This is unusual since they are farther out of the money and there are only 2 days left until expiry. Are dealers hedging for something we don't know about?

SPY $580 short puts for 3/21

QQQ $490 short puts for 3/21

IWM $215 short puts for 3/21

We pay attention to these proprietary dealer metrics, not just gamma exposure (GEX) as often times it doesn't tell the whole story. Without having this view, one might assume that $200 and $205 were largest exposures for IWM but we can see that the simply isn't the case. At any rate, we'll see if another news catalyst is on the horizon or if these dealer levels simply end up acting as a magnet anyway as price attempts to chew through supply. Overall, market bears will want to keep SPY below $570 between now and then in order to maintain near term control on the charts otherwise the relief leg may begin to see continued upside. 🔐For access to premium trading content including swing trade alerts & live day trading room visit 👉 - https://www.carnivoretrades.com/ 

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