I mentioned in a prior commentary there are a large number of Leap Calls deep in the money that expire Friday. The selling of this $125 Billion Position has wreaked havoc on the Equity Complex.
The Delta squaring was axiomatic as the position was a very large offsides for Writers.
They buy Volatility to hedge, they will not square by the underlying Long - they know it all this will be SOLD.
1C retracements are very weak, very. They appear dramatic as the ranges are large, but in broader Context - they are quite small on a percentage basis of the Implied range and Price Objectives.
The 2/5 is now setting up, these are violent affairs that take most Traders off guard. They are vicious and move in 3 Counts.
2A Up / 2B Down / 2 C Up - these can be to the.382 to .500 with a mild overthrow to screw the Chasers prior to 3/5 beginning (the Real move lower).
Dip Buyers have been scorched. They repeatedly tried calling 7 since the November Highs. Calls for 18K and 20 K were common.
When the FED no longer is supporting the Equity Complex... You Sell.
We detailed this in dozens of CommentAary regarding Interest Rates, Distribution Patterns, 3x and 4X Negative Divergences, Repo Contraction, m@ Velocity, Consumer Confidence, and far more.
Identical to my Bond Thesis, it requires time to construct Complex Highs, as Distribution had no real Buyers left, Margin was at all time highs... on and on it goes until it does not.
This will drag on for some time, probably until just ahead of the March FOMC, January is ahead next week and may provide the impetus for a Low prior for 2/5 or we may see 2/5 begin from 14156.
The Algos enjoy trapping everyone at Lows only to absolutely Rip in Reverse to scorch the Order Book of Sellers at Lows and stops runs continue all the way to the .500% of the entire Correction.