© Copyright 2025 eOption, a division of Regal Securities, Inc., Member
FINRA/
SIPC |
Important Disclosures
950 Milwaukee Ave., Ste. 102 | Glenview, IL 60025
The information on this web site is for discussion and information purposes only. All accounts accepted at the discretion of eOption which accepts customer orders only on an unsolicited basis, and does not make any recommendations regarding any security or securities product with the possible exception of orders executed by our full service bond desk. Nothing contained herein should be considered as an offer to buy or sell any security or securities product. Online trading has inherent risks due to loss of online services or delays from system performance, risk parameters, market conditions, and erroneous or unavailable market data.
FINRA BrokerCheck reports for Regal Securities and its investment professionals are available at www.finra.org/brokercheck.
Options Disclosure: Options involve risk and are not suitable for all investors. Prior to trading options, you must be approved for options trading and read the Characteristics and Risks of Standardized Options. A copy may also be requested via email at support@eoption.com or via mail to eOption, 950 Milwaukee Ave., Ste. 102, Glenview, IL 60025. Online trading has inherent risks due to loss of online services or delays from system performance, risk parameters, market conditions, and erroneous or unavailable market data.
eOption Commissions: Broker-assisted orders are an additional $15. Option strategies involve multiple purchases; therefore your transaction costs may be significant for option strategy trades. A commission rate of $2.00 for equities and $3.99 + $.10/contract for options, per execution, applies to orders entered and filled by eOption's Auto Trade Desk and does not apply to customers who enter their trades directly into the eOption platform and are not utilizing the Auto Trade desk.
Broker Comparison: The competitor rates from published websites were verified on 05/25/2023 and are believed to be accurate, but not guaranteed. Commissions are subject to change without notice. At some firms, commissions may not reflect broker-assisted fees, orders over 1,000 shares, penny stock trades, OTCBB, pink sheet stocks or foreign stock orders. Firms may offer reduced commissions if additional criteria are met.
Blog & Commentary: eOption is neither affiliated with, sponsored by, nor endorses commentary and the opinions expressed are solely their own. Content is provided for educational and informational purposes only and eOption cannot attest to its accuracy or completeness. No information provided has been endorsed by eOption.com and does not constitute a recommendation by eOption to buy or sell a particular investment. You are solely responsible for your own investment decisions, and eOption makes no investment recommendations and does not provide financial, tax or legal advice.
The Market Is Bearish
www.oneoption.com
Favor the short side, but don’t be aggressive. Be patient and pick your entry points carefully.
PRE-OPEN MARKET COMMENTS WEDNESDAY – In yesterday’s comments I mentioned the fundamental reasons for market weakness. Please go back and read those comments. From a technical perspective the market is weak and I want to focus on that this morning.
The SPY gapped down yesterday and the bounce from Monday was instantly erased. Buyers did not “scoop” that gap down and it was a sign that they are passive. The market has been in a steady drift lower and I needed that bounce Monday so that I could gauge the selling pressure. Now I know sellers are in control. The SPY made lower highs during the day and the 50-day MA was providing some support. In the last hour of trading, it was breached on heavy volume. This is a time to favor the short side.
Bull markets die hard and the pullback has been wimpy. We know that from the mixed overlapping candles and relatively light volume. Bulls have been conditioned to buy dips and they need to be “discouraged”. The best way to do that is to breach technical support levels that they were leaning on. Once they are breached, a few things happen. 1. Buyers pull bids because they feel that they will be able to buy at lower levels. 2. Profit taking accelerates because sellers can see that technical support levels are failing. 3. Dip buyers have to exit longs that are losing money. This adds to the selling pressure and the move lower accelerates.
This morning the S&P 500 is down 8 points. Asia was down substantially and Europe was down marginally overnight. The SPY is clearly below the AVWAPQ and the 50-day MA. The temptation will be to short the heck out of stocks this morning. I would not suggest doing that. We can see from the drift lower that buyers are still engaged (mixed overlapping candles). The price action on the drop yesterday was stubborn. Why would buyers just throw in the towel instantly?
I would gauge the early selling pressure first. We are likely to see an early drop and then a bounce. Anxious shorts will act early and they could be flushed out. 1OP is in a bearish cycle. See what it produces. If we see long red candles on volume, you know the selling pressure is heavy (unlikely scenario). Then you can get more aggressive with your shorts. A wimpy bounce during the first bullish cycle will tell you that we are going lower.
If the bear cycle that starts the day has long wicks and tails and mixed overlapping candles, you know the move lower is not that strong and that early shorts are going to get squeezed. The market might fill the gap, but then I would be watching for signs of resistance. The next bearish cycle is likely to provide a good entry for shorts. Know that the FOMC minutes will be released this afternoon. After a big move yesterday, a day of rest is likely. The market action could be rather dull until that news.
I am fairly bearish here, but I am picking my entry points carefully and I am expecting bounces.
Content is provided by OneOption, LLC, which has no affiliation with Regal Securities, Inc. (“Regal”) This commentary is provided for information purposes only, and is not a recommendation, offer or solicitation by Regal to buy or sell securities or to adopt any investment strategy. Regal has not participated in the creation of the OneOption content and does not directly or indirectly endorse the content. Any reliance on this material is at the sole discretion of the reader.