Condor Options

In our weekend note to subscribers, we closed with the following thoughts:

The market seems ready to test the October lows, and if this third time isn’t the charm, look out below.  Specifically, we’re watching 846 on SPX / 83.70 on SPY.  Remember that it’s common for sellers to push through any GTC stop loss orders before bowing out, so it’s entirely possible that we violate those recent lows briefly before turning back up.

That’s precisely what has happened so far this week: persistent and merciless selling all the way to the October lows, and then today, we blew through the lows and around 12:45 – 1:00, saw a huge volume spike as the sell orders people had set just below were triggered.  SPX made it down to 818.  After that brief violation was exhausted, we got a major rally on very high volume (and very good breadth) through the afternoon.  As of 3:10PM, we’ve retraced some of those gains to around the pivot point, but this definitely looks like a textbook example of a false breakdown.

Not willing to guess what that means for next week.  But one thing’s for sure: the range between the S2 and R2 pivot points on SPX tomorrow will be more than 100 points.  That is just crazy.