George,
My signals are very mixed right now. The high level of Jan '03 QQQ25 open interest at the end of 2002 was built up over quite a few days before I left for vacation last weekend and early this week. When I checked on Jan 1st, it was still at 180K+. But within the first half hour of trading today (Jan 2nd), the open interest got slashed down to 116K or so. In other words, much of the high P/C ratio in the first half hour was put closing. It was quite unusual. My confused Cabbages are proposing a few possible explanations that we are seeing:
(1) The exercise we witnessed at the end of last year was engineered for the sake of selling puts to sucker bears. In other words, we are up and away in a cyclical bull market now, with a revival of Zeev's old 1600+ within January.
(2) Today's action (and possibly tomorow Friday's and Monday's) is just some options manipulation to free the put writers from the obligations, before the market eventually tanks to below QQQ25 where the MAX Pain is now, and possibly even lower if more calls can be sold on and puts closed on AJC's cheer-leading tomorrow evening.
Like I said, the Cabbages are quite confused, and rightly indecisive given the current low volume. If I have to bet money, I'd say 40/60 to the two scenerios, but I have decided against holding much overnight net exposure to either long or short for the time being.
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