3/26 Daily Market Note: Low Volume Session with late day flush in shortened week
End of Day weakness may be Quarter-End Rebalancing
Hey Folks -
We’re seeing some low volume trading where today’s session is characterized by a narrow range (tight balance), only to see a late day flush lower. If I had to hypothesize what’s behind the late-day selloff, I’d say it’s quarter-end rebalancing where funds have to ensure that equity and fixed income allocations are not overly distorted from their mandates given the outperformance of stocks in Q1 2024.
Today’s low volume price action made scalping difficult and made it tricky for both Option sellers and buyers as the pace of the market was slow for most of the day, only to see a large change of pace at the end. At the beginning of the session, most 0DTE options on the S&P 500 and Nasdaq-100 option chain today were about 15% lower than they usually are.
This is a situation where the Seller receives less premium for the risk of selling puts/calls and the Buyer pays less to attempt a directional move (but with lower probability). Not really ideal for either side.
As for our pre-market today, we looked for the following things as shown below:
If Nasdaq 18620 could be broken above, then we some nice range extension. That did not happen today. Instead, we balanced for most of the day and then cascaded lower into the close.
Caution level for 18560 on Nasdaq-100’s NQ Index and 5285 for S&P 500’s ES Index
While I wait for volume to return for better intraday opportunities, we’ve been looking at a few longer-term opportunities such as several oversold couple retail companies in our previous post.
In this note, I’m going to give a short update on China - specifically on key names within the KWEB ETF.