carleygarner
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September 17th, 2010
$9.99 e-book Deal of the Week "A Trader's First Book on Commodities"
http://digs.by/c1z3hB
Repeat of the last quarterly futures and options expiration?
This week's trade has mirrored that of the June expiration; several sessions of consolidation, following a dramatic rally. If you recall, the last time around the "Monday after" saw a dramatic gap up on the Sunday night open only to sell off into the close...and for the next 2 weeks for that matter. We can't help but think we could get a repeat. Accordingly, we can't rule out 1136ish in the December S&P early next week as traders finally square their option expiration headaches...but it also means such pricing would be a "solid" place to be bearish.
Of course, it is also possible that the Thursday night highs were the highs of this move all-together. If you have been reading this newsletter, you know that we have been noting signs of a possible reversal and pointed out the possibility of a "crazy spike high to the low 1130's", before rolling over. Was that it for the rally?
There are many arguments in favor for the bulls, but as we all know, timing is everything and I am not convinced that the markets will be able to overcome some of the near-term obstacles. For instance, seasonal tendencies are calling for a pullback, many of the large speculators (smart money?) have gone short and added to their short positions this week, and market sentiment has gone from being overly bearish to overly bullish.
As we mentioned on Wednesday, the markets seemed to want to hover into expiration simply because that is what would cause the most pain to the most people...and it did. Those with short calls, or hanging onto short September futures into the last minute were likely squeezed hard enough in the last few weeks to make them reconsider trading. What will be even more painful for "most", will be watching the market move lower next week without them...assuming it happens. Just in case you missed it from yesterday:
If you haven't watched the movie "Floored" I highly recommend it. Although it is rather racy and even shocking, it takes a good look at the reality of trading futures and options. The reason I bring it up, is there is a particular quote that goes something like this (this is a highly edited version, yet I still apologize); "The market is a prostitute; it screws as many people as it can for as much money as it can".
The point is, the market shouldn't be taken for granted. It is bigger than all of us, and in order to survive we must look at things in a way that most don't. After all, most active traders lose money...so if we are analyzing and forming the same expectations as nearly everyone else, we are probably wrong.
We are sticking with the idea that the markets are starting to get a bit toppy, look for resistance in the S&P in the mid to high 1130's, should we get a repeat of the quarterly expiration rally to fish the last of the buy stops. Similar resistance in the Russell lies at 660ish.
* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does. Charts provided by Track 'n Trade, Gecko software.
**Seasonality is already factored into current prices, any references to such does not indicate future market action.
Please note: An e-mini S&P and e-mini NASDAQ chart are used because they better for charting purposes, but trade recommendations can be applied to either the full-sized S&P or the mini. Unless otherwise noted, profit and loss will be based on the mini version.
Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
Flat
*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.
There is substantial risk of loss in trading futures and options.
Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
$9.99 e-book Deal of the Week "A Trader's First Book on Commodities"
http://digs.by/c1z3hB
Repeat of the last quarterly futures and options expiration?
This week's trade has mirrored that of the June expiration; several sessions of consolidation, following a dramatic rally. If you recall, the last time around the "Monday after" saw a dramatic gap up on the Sunday night open only to sell off into the close...and for the next 2 weeks for that matter. We can't help but think we could get a repeat. Accordingly, we can't rule out 1136ish in the December S&P early next week as traders finally square their option expiration headaches...but it also means such pricing would be a "solid" place to be bearish.
Of course, it is also possible that the Thursday night highs were the highs of this move all-together. If you have been reading this newsletter, you know that we have been noting signs of a possible reversal and pointed out the possibility of a "crazy spike high to the low 1130's", before rolling over. Was that it for the rally?
There are many arguments in favor for the bulls, but as we all know, timing is everything and I am not convinced that the markets will be able to overcome some of the near-term obstacles. For instance, seasonal tendencies are calling for a pullback, many of the large speculators (smart money?) have gone short and added to their short positions this week, and market sentiment has gone from being overly bearish to overly bullish.
As we mentioned on Wednesday, the markets seemed to want to hover into expiration simply because that is what would cause the most pain to the most people...and it did. Those with short calls, or hanging onto short September futures into the last minute were likely squeezed hard enough in the last few weeks to make them reconsider trading. What will be even more painful for "most", will be watching the market move lower next week without them...assuming it happens. Just in case you missed it from yesterday:
If you haven't watched the movie "Floored" I highly recommend it. Although it is rather racy and even shocking, it takes a good look at the reality of trading futures and options. The reason I bring it up, is there is a particular quote that goes something like this (this is a highly edited version, yet I still apologize); "The market is a prostitute; it screws as many people as it can for as much money as it can".
The point is, the market shouldn't be taken for granted. It is bigger than all of us, and in order to survive we must look at things in a way that most don't. After all, most active traders lose money...so if we are analyzing and forming the same expectations as nearly everyone else, we are probably wrong.
We are sticking with the idea that the markets are starting to get a bit toppy, look for resistance in the S&P in the mid to high 1130's, should we get a repeat of the quarterly expiration rally to fish the last of the buy stops. Similar resistance in the Russell lies at 660ish.
* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does. Charts provided by Track 'n Trade, Gecko software.
**Seasonality is already factored into current prices, any references to such does not indicate future market action.
Please note: An e-mini S&P and e-mini NASDAQ chart are used because they better for charting purposes, but trade recommendations can be applied to either the full-sized S&P or the mini. Unless otherwise noted, profit and loss will be based on the mini version.
Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
Flat
*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.
There is substantial risk of loss in trading futures and options.
Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
