ETF Options Trading For The Holiday Week (QQQQ, XLE, XRT, XLF)

options-tradingThe shortened 4th of July holiday week begins with warnings from the World Bank, a consumer who would rather save than spend. In what will be a volatile low volume week, we have included some key technical market indicators to look at for your ETF trading.

“The option activity and technical backdrop on many of the major sector exchange-traded funds (ETF) that we follow point toward a heightened probability of more trading-range behavior in the broader market in the immediate days ahead. For example, the buy (to open) put/call volume ratio on the SPDR S&P Retail Fund (XRT) is back in decline mode, which may suggest that retail stocks are no longer under accumulation among bigger market players. At the same time, there is plenty of put open interest in the July series just beneath current levels that would suggest these players are appropriately hedged (through July expiration), and are therefore not in any hurry to sell,” Todd Salamone Reports from schaeffersresearch.com.

“This analysis extends to financial- and technology-related stocks. Specifically, option activity and the open interest configurations on the Select Sector Financial Trust (XLF) and the PowerShares QQQ Trust (QQQQ) reveal that the buy (to open) put/call volume ratio is declining as the XLF, while the QQQQ is resting just above major put support levels,” Todd Salamone Reports.

“Meanwhile, the buy (to open) call/put ratio on the Select Sector SPDR Energy Trust (XLE) is rolling over from recent highs. Assuming the call volume was related to hedging short positions, the shorting activity that we discussed last week as a potential headwind for this group may have climaxed for now. But, the XLE comes into this week sandwiched between support from its 80-day and 160-day moving averages near 47, and below its 200-day moving average at 48.53,” Todd Salamone Reports.

“Turning to the technical backdrop, the XLF continues to trade below its 200-day moving average at 12.01, while the XRT has traded in a range between 26 and 29 since April. There is a bright spot for technology bulls, as the QQQQ’s technical backdrop is among the best of the four we have discussed. The tech ETF trades above all major intermediate-term and longer-term moving averages on a daily chart. The risk is this is a sector dominated by hedge funds — which is a positive if they are in accumulation mode, but could be a huge negative if they suddenly turn a cold shoulder to this group. Should technology, financials, energy, and retail stocks continue to trade in a range, the broader SPX would be expected to behave similarly,” Todd Salamone Reports.

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