Last week here I stated the open interest favored higher prices and was “notably bullish.” I showed that there were no calls in the way of making new highs, something that doesn’t happen very often. And now here we are at all time highs.

Open Interest:

SPY-W: SPY-W: (36 of 44 pins since Wednesday expiration inception).* The current best pin for this coming Wednesday expiration is 246 with an open interest range of 245 to 247. Although there is a high strike of calls at 242, I would ignore that unless SPY dropped back and held below 244 prior to Wednesday. Because SPY closed strong on Friday, it’s possible that strength will continue and it will be able to get through those 247 calls, but at the moment I would note that level as resistance.

SPY-F: (29 of 38 pins – I am not counting Friday as a pin because by the end of the week there were enough built up calls that SPY could easily have closed lower if not for its strength – see below).* If we were to believe that SPY closed over its best pin and thus, over its high calls, then that typically is extra bullish going forward. I would take that with a grain of salt since the high calls were not enormous. Either way, and without complicating things, new highs plus closing over its high calls tends to lead to further gains. At the moment you could say that there are two areas that can act as a good pin (244 or 245); however, if SPY remains over the 245 level then the only calls in the way are at 247. If SPY gets to 247 next week it likely will get rejected (at least initially). If SPY is able to get over the 247 calls, but the open interest does not shift by the end of the week, then there is a  high probability price would fall back to that level or below prior to Friday’s expiration.

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Pinning stuff:

*An explanation as to how I define pinning can be found here. More information about what pinning is can be found under the education section of my site.

Wednesday 7/12: Successful pin. 

Friday 7/14: There was a pretty good pin at 244 so the fact that SPY was not only able to hold over that, but also to get over all the high calls (even if they weren’t as high as normal) does demonstrate strength. 

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