Benefit Of The Doubt

Yesterday was a good day for the bulls and not just because of the outsized gains. There was heavy put buying and Rydex traders became more bearish showing that traders have not yet embraced this rally. Chances are that traders will fall back in love with the market before the move is over. The downside is that the stupefying moves continued as the market swings wildly from day to day.

While wild volatility is hardly encouraging I believe the bulls deserve the benefit of the doubt between now and expiration. A lot of puts have been bought in the past few weeks and they might have to expire worthless before the bears can make another run.

1 comment:

PJ said...

Retail sales data from Mastercard showed a 3.6% drop from May a year ago. That's after significant increases yoy in March. This confirms the recent plunge in retail sales that I mentioned last week.

Employment data typically lags retail sales by 4-5 months so we should see significant drops in payrolls by September.

However, corporate executives are aware of the falling sales in real-time and the stock market usually reacts much quicker than employment.

Given the big headline number we'll see tomorrow, and the put buying, I can see us going up for a brief spell. But this may be the last hurrah for the bulls.