Yesterday, at midday I stated that there was a decent chance of a bounce and took a very modest long position. Some events since then have led me to reconsider my stance. I will look to take profits into strength today as I no longer believe the bounce is worth playing.
What has changed? GM has upsized their equity offering which will now be around $20 billion, including preferred shares.That is an awful lot of supply to digest, not even considering the other $5 billion in IPOs and secondaries on the docket for the week.
Secondly, when I went long around midday there was a decent amount of put buying. By the end of the day there was call buying at the ISE and very little put activity at the CBOE. This is especially surprising considering the magnitude of the decline.
Sentiment is not in place for a good low as most believe this is a normal correction and are showing it in the options market. There is heavy supply about to hit the market and we won't be maximum oversold until early next week. I am going to give this correction a couple more days before venturing to the long side.