11912-chartFrom the September 14 high, the SPY is down 6.3%. The post-election sell-off represents almost two-thirds of the damage.  Importantly, the SPY broke the bullish trend line since June, then decisively broke the 75-day moving average and is now sitting on the 200 (see chart).

In the middle of September, the market was extended and nearing a short-term overbought situation with greater than 80% of the stock above their 10-day moving average.  This morning, roughly 23% of the 3,600 stocks we follow are above their 10-dma. When there are fewer than 10%, it has historically been a good time to try and catch a bounce. We will wait and see.

Often when the market is under pressure, not only do we see the VIX move higher (which it has), but we also see a lot more put buying. The opposite is true in bullish tapes – we usually see more call buying. Surprising, in yesterday’s option trading, 60% of the most unusual trades were call buyers. Market participants bought calls in Alaska Air Group (ALK) (Dec 40s 3900 times), International Game Technology (IGT) (Nov 13s 11K times), GEO Group (GEO) (Mar 30s 2K times), and in ANN INC (ANN) (Dec 35s 2K times). The put buyers were in Harman International Industries (HAR) (Nov 37.50s 2,500 times), Mead Johnson Nutrition (MJN) (Dec 55s 6,300 times), and TRW Automotive (TRW) (Nov 45s 1,500 times).

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