Perfect SPY Trade – August Market Notes

August 26, 2021 | By greg | Filed in: Stocks, Trade Setups.

Another month has gone by with little updates as I have been super busy with so many different things. I’ve had projects going on at home, a big VoIP phone deployment/cabling job, and schooling taking the bulk of my time. I will share more of the technical stuff in another article and get right to the discussion on the markets.

First I want to bring up one of the most perfect trades I have come across in all of my years watching the equities markets; one that has been consistent almost to the day over the past few months. I started typing this up a few weeks ago and never got around to finishing it, and I am sure once I do this will come off. Regardless, lets take a look at the SPY daily chart going back into May:

As you can see, I labeled each dip from May 19th up to yesterday with the date, aside from a little bonus volatility at the end of July/beginning of August. Like clockwork, this has been happening on each OpEx week and has been such an easy, profitable trade. I believe this is related to the hedging effects of market makers as the options market has gotten more popular recently. Anytime an option contract is purchase, somewhere there is a market maker that must take the other side of that trade. They must remain market neutral and in the case of a long call option, the market maker would need to short the underlying stock. I can’t be sure this will continue, especially if it gets any attention but keep an eye out for it.

Another SPY trade a took was just this morning and this type of trade is a bit more common than the previous OpEx trade and much more reliable. See the chart below:

This is one of my main volatility trades for day trading and is highly probable when there is news or some sort of volatility event. It is a type of undercut and rally trade where you can expect traders to jump in to buy the dip prematurely and make money off their impatience. As you can see in the picture, you simply wait for the dip buyers to come in and then take the short side, riding back down to the previous low or the breach of that low and then you exit or even go long. I usually will just exit as my main priority is capital preservation and not taking more risk. This is a trade I took this morning and was very happy with.

Other stocks I have on watch for swings or longer term holds:

  • FNKO, SNMSF – Disney backpacks (Google them), Paw Patrol movie, Toca games on phones, tablets.
  • OCA, FTCV – SPACs taking Kin Insurance and E-toro public.
  • CROX – amazing growth, I see more in the future
  • ETSY – buying habits that have changed during pandemic won’t be going away. This is in the long term portfolio.

That’s about all I got as far as trade updates as there have been no IPOs really and volatility has been pretty low. Jackson Hole is going on this week so volume has been low as well and investors are playing the waiting game. I do feel if the Fed pushes back the tapering we will rally to the next level up in the overall market, but I think that will only set us up for a nastier drop when the tapering does finally begin.

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