DMA Table Still Negative. But Erlanger Options Rank Showing Extreme Short Selling Indicating A Bounce In The Offing

Stocks struggled again this past week with the S&P 500 falling -5.79% for the week and the S&P 500 has now lost ground in 10 of the last 11 weeks, falling -19.16%, which is very unusual. Then again, the Federal Reserve raising is interest rates as we potentially enter a recession is also very unusual.

Stocks did rise on Wednesday and Friday but struggled on the other days especially as the S&P 500 broke below 3700 on Thursday losing -3.25%.

Our DMA Channel Table still remains very negative with regard to bias. Last week we showed the action on equities, growth vs value and bonds. This week we add the U.S. Dollar, Commodities and Overseas markets. The only one asset that is in good shape is the U.S. Dollar. As such, we are currently in an environment we would call “a run but you cannot hide”.

Currently, we feel that the end of the selling could be near at hand as our Sector Erlanger Option rank sees 23 of 24 sectors with extreme put activity, a score above 70, as measured by this model. We call this the Erlanger Put Squeeze. A week ago, this measure was at only 2 of 24 sectors above 70.

The Erlanger Option Rank tracks open interest, premiums, money flow and number of contracts that trade each day over the last ten trading days. We then take each stock that trades options and build a Sector Erlanger Option Rank.