Two weeks ago here, I wrote that if the SPX gaps filled it was a good buying opportunity. Then last week here, I wrote that the market would likely grind higher once again and possibly break new highs after the Wednesday SPY expiration. Yes, yes and yes!

Open Interest:

SPY-W: (29 of 37 pins since Wednesday expiration inception).* There is a fairly decent range for SPY to trade in without much call resistance or put support. There are both some calls and puts at the 240 level, but it can easily shift and isn’t nearly as relevant as the 245 strike that will act as a big level of resistance if SPY were to trade up there. Basically, SPY has decent room to move between Tuesday and Wednesday before expiration. 

SPY-F: (23 of 32 pins since I began tracking Friday’s).* This open interest is much more constrictive with the current best pin being between 241 and 242. If price is able to get over 242 prior to Friday (especially if it is in the beginning of the week) then this open interest might shift with some of the calls closing out; however, the longer price stays under that level, the more difficult it will be for SPY to rally much further next week. If price does get over 242 and 243 early in the week and the open interest does not shift then there will likely be a pullback by the close on Friday. To the downside, 241 and 239 offer put support; thus, any moves lower to the start of the week offers a buy the dip opportunity if those puts remain in the open interest. 

In Sum, the grind higher is likely to continue in SPY; however, a pullback into support is possible and also a buying opportunity if it happens toward the beginning of the week. If, on the other hand, SPY moves higher at the start of the week then it has room to 245 before Wednesday’s expiration. And if SPY should get above 243, bulls would want to see SPY’s Friday expiration shift or it could result in an end of the week pullback in order to pin.

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*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 5/24 : Successful pin.

Wednesday 5/26 : Successful pin.

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