• Options Activity: The call wall is currently 3275 but is positioning ever closer to 3300. Puts mark the put floor at 3250, up from 3225 yesterday. And while all eyes were on calls, deep OTM put prices fell, on average, 21% and saw significant increases in volume as a percent of open interest (32-63%). At the end of the day, 9000 put contracts for the front month 3200 strike, split into 42 transactions, were filled by the CBOE. The “flip point” is unchanged …sitting at 3200.
• Dark Pools: The index value, today, is consistent with the resumption of buying. (Prior 3 days saw early signs of distribution.)
• Valuations: Calls were cheaper than puts and with nearly every down-auction today, calls got bought. That’s call buying at a market high! This was especially evident at 3275. That example posted separately.
• Volatility: VIX fell dramatically in the final half hour of trading. Term structure remains positive. The low vol regime persists.
• Auction Market Process: The market remains in vertical development, in an up-auction, and with fairest price, today, rising to 3270.
• Safe Havens: Whipsaws in the Yen, Gold, Oil, and the 10-Year and all continued their downslide. The World Gold Council is reporting that central bank gold-buying is expected to continue into 2020 as countries continue to create a hedge against geopolitical risk and diversify their reserves away from the US dollar.
• Macro: US, Asian, Australian, and European markets all saw equities hit record highs on Thursday, with Middle East tensions easing and the prospect of a Sino-US “phase one” deal on track to be signed next week. The House approved a War Powers resolution to limit Trump’s ability to pursue military action against Iran – and that’s bullish!
Taken Together: A slowing economy, weaker earnings, high valuations, a trade war and Middle East tensions have all been unable to compete with loose monetary policy by the Fed and low rates. As a result, we saw today’s trading session ending with a bullish call buying spree. At the same time, however, we again saw high volume in OTM puts …most notably at the critical 3200 strike.