Indecisive IWM - Big Thrust in GDX MF -April 19, 2012

[Billy]

After gapping down, IWM traded mostly sideways around yesterday’s Daily S1 (80.21) where it closed the day, right under the key Quarterly pivot (80.28). A secondary short entry is advised today at the same limit price of 80.03 as the initial robot’s entry.

If yesterday’s floor clusters were pretty neutral, today’s outlook is more bearish with a total strength resistance of 20 (11 + 9) vs. a total strength support of 10 (8 + 2). Options holders’ maximal pain for opex tomorrow is at 82 so we must be wary of attempts by market makers to close the week near that level. Hence, the bias is bullish for opex and we may need to wait until next week to reap the rewards of our patience if not stopped out at 81.63 and in the absence of the cash or buy signals discussed by Pascal in his “comment of the day” article.

13872

The Precious Metals Money Flow was weak all day, crossing below the porosity level and below its average 40 minutes before the closing bell. Then, 20 minutes later, one of the strongest up thrust ever witnessed since tracking the indicator saved the day and the GDX robot position closing with a positive MF for the day! We’ll see if this was “smart” money buying near the close. This looks like market makers loading inventories in individual stocks below the day’s VWAP which would mean that they see institutional buying coming in above Monthly S1 (46.27) . All we need to know for sure is that the EOD robot is holding its long position and is still protected by a daily close of the MF below the porosity tolerance (-0.145% today). There is no secondary entry advised for today. The RT model is still short but just 0.025% away from a buy signal at +0.145%).

13873

The floor clusters outlook is as bullish as can be with a 31:8 total strength ratio to the bulls advantage.
Billy

13874

[Riskslayer]

Hi Billy,

A couple of months ago, I spent sometime trying to get max pain numbers from various Internet sources. I found quite a bit of variation. I was wondering what source you use? and, does the Max Pain calc vary each day, such that numbers from last Fri could have moved significantly entering today's trading?

I have been using the Leavitt Bros blog at: http://leavittbrothers.com/blog/?p=5538 - any opinion on those guys? they were saying 83-84 would be max pain on IWM April options (but, that was last Fri).

Thanks

Shawn


After gapping down, IWM traded mostly sideways around yesterday’s Daily S1 (80.21) where
it closed the day, right under the key Quarterly pivot (80.28). A secondary short entry is advised today at the same limit price of 80.03 as the initial robot’s entry.

If yesterday’s floor clusters were pretty neutral, today’s outlook is more bearish with a total strength resistance of 20 (11 + 9) vs. a total strength support of 10 (8 + 2). Options holders’ maximal pain for opex tomorrow is at 82 so we must be wary of attempts by market makers to close the week near that level. Hence, the bias is bullish for opex and we may need to wait until next week to reap the rewards of our patience if not stopped out at 81.63 and in the absence of the cash or buy signals discussed by Pascal in his “comment of the day” article.

13872

The Precious Metals Money Flow was weak all day, crossing below the porosity level and below its average 40 minutes before the closing bell. Then, 20 minutes later, one of the strongest up thrust ever witnessed since tracking the indicator saved the day and the GDX robot position closing with a positive MF for the day! We’ll see if this was “smart” money buying near the close. This looks like market makers loading inventories in individual stocks below the day’s VWAP which would mean that they see institutional buying coming in above Monthly S1 (46.27) . All we need to know for sure is that the EOD robot is holding its long position and is still protected by a daily close of the MF below the porosity tolerance (-0.145% today). There is no secondary entry advised for today. The RT model is still short but just 0.025% away from a buy signal at +0.145%).

13873

The floor clusters outlook is as bullish as can be with a 31:8 total strength ratio to the bulls advantage.
Billy

13874

[DJones]

Options holders’ maximal pain for opex tomorrow is at 82 so we must be wary of attempts by market makers to close the week near that level. Hence, the bias is bullish for opex and we may need to wait until next week to reap the rewards of our patience if not stopped out at 81.63 and in the absence of the cash or buy signals discussed by Pascal in his “comment of the day” article.

Billy, I'm curious if you ever adjust your stops based on maximal pain numbers.
Thanks

[Billy]

Hi Billy,

A couple of months ago, I spent sometime trying to get max pain numbers from various Internet sources. I found quite a bit of variation. I was wondering what source you use? and, does the Max Pain calc vary each day, such that numbers from last Fri could have moved significantly entering today's trading?

I have been using the Leavitt Bros blog at: http://leavittbrothers.com/blog/?p=5538 - any opinion on those guys? they were saying 83-84 would be max pain on IWM April options (but, that was last Fri).

Thanks

Shawn

Shawn,

Unfortunately, there is apparently no free resources for Max Pain calculations. The original formula was developed by BCA Software but their website content seems to have been shut down for quite a while. All other sources are artifacts. I think Leavitt Brothers is a good source and I also check them prior to each expiration. I’ve noted the 82 max pain for IWM today in my morning’s readings routine (over 35 different blogs and websites), but I couldn’t locate it again.

Our best resource used to be our partner Thanassis when he had time available for trading options. He’s now one of the busiest software developers in Greece and is unable to trade much anymore. But I will ask if he can write down his max pain formula for us. Friends like Ernst could also help, I think.

Of course, Max Pain changes each day and also intraday, but only in relationship with options open interest changes.
The MaxPain calculation tells you how money is invested in the options for a security for any given month, and identifies the closing price that will maximize the dollars lost to worthless options. Every option contract has some intrinsic value, ranging from zero and upward, that depends on the value of the underlying security. On expiration day, intrinsic value is all that remains, so the option is either worthless or has value that is the difference between underlying security value and the strike price. What MaxPain does is to calculate the value of all open contracts for a set of possible underlying security closing prices.
Billy

[Billy]

Billy, I'm curious if you ever adjust your stops based on maximal pain numbers.
Thanks

In a word, NO. There is nothing in MaxPain that demands the closing price on expiration day to be at the MaxPain point. It is just a bias to be aware of making abstraction of all other market’s driving forces.
Billy

[grems8544]

Shawn,

Unfortunately, there is apparently no free resources for Max Pain calculations.

I use Options Oracle: 13883

This is a Zipped Executable. You will have to extract it.

Once running, go to Config button, then ensure under the General tab that "Online Servers & Stock Exchange Selection" is set to "PLugIn Server US (CBOE)". Select Save

Up at the top, where the Symbol field is, enter "IWM" without the quotes. Underneath that select "Update". Once loaded, at the bottom of the main page, select "Option Pain"

In the popup graph, navigate such that the vertical cursor aligns with the bottom of the curve. At the very bottom of the window, you can read that Max Pain for IWM Options is presently strike = $82.

Regards,

pgd

[dwn]

I use Options Oracle: 13883

This is a Zipped Executable. You will have to extract it.

Once running, go to Config button, then ensure under the General tab that "Online Servers & Stock Exchange Selection" is set to "PLugIn Server US (CBOE)". Select Save

Up at the top, where the Symbol field is, enter "IWM" without the quotes. Underneath that select "Update". Once loaded, at the bottom of the main page, select "Option Pain"

In the popup graph, navigate such that the vertical cursor aligns with the bottom of the curve. At the very bottom of the window, you can read that Max Pain for IWM Options is presently strike = $82.

Regards,

pgd

Paul,

Walkin' around behind you is like picking up pearls.

Thanks,
Dan

[Billy]

Paul,

Walkin' around behind you is like picking up pearls.

Thanks,
Dan

I totally agree. Thank you Paul!
Billy

[brrim]

Pascal; This is in response to your AM comment. I put it here as I couldn't figure out how to attach a gif on the other thread.
13885Looking at the daily of IWM there is a potential head and shoulders top with a neckline at 78.50. Measuring the height of the head at 6.16 gives a potential target of 72.34. There is a potential swing high of 81.55 which will be confirmed if we break below the 4/10 low of 78.14.

Best regards,
Robert