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Witching Hour

By Paul Cherney I was wrong about more volatility in Thursday's markets. There was virtually no volatility in the session.

Maybe it will come on Friday. Friday is the Triple Witch -- when stock options, stock index options and stock index futures expire. Futures contracts stop trading as of the close Thursday evening, but the settlement price for the contract is calculated by taking the opening values of each component member of the underlying index (like the S&P 500 or the Nasdaq 100) and then using the openings of each individual component to construct a special cash "settlement" value. Openings on the Friday of the Triple Witch usually see a flood of volume as hedges are unwound or put on just for the opening. At the opening in December (December, 2001 Triple Witch Friday) prices gapped higher.

Usually, after the first 40 minutes of trading, the markets calm down and see sideways trade, but tomorrow might not be so tranquil because I haven't seen the kind of expansion in volume I am used to seeing in the days ahead of the Triple Witch.

My end of day indicators are neutral with a negative bias, but the Triple Witch Friday is a day unto itself.

The Nasdaq has a layer of immediate intraday resistance at 1864-1875. The next layer of resistance is well-defined at 1887-1899. These are intraday levels; the charts based on end-of-day price bars show a band of resistance in the 1901-1960 area, with a focus of 1908-1942.

Immediate support for the Nasdaq is well-organized in the 1853-1832 area. If prices were to print between 1541-1532 I think there would be a sharp rebound intraday, but the buying might only be shorts booking profits and probably won't have a lasting impact (maybe just for the day).

The S&P 500 has a layer of support at 1161.00-1154 and then 1158-1143.

The S&P 500 has been caught in a band of intermediate term resistance which runs from 1150-1177 (daily charts). Immediate intraday resistance is a shelf at 1154-1158 (intraday price action). Resistance above that (intraday) is 1159-1169, with a focus of 1160-1165. Cherney is market analyst for Standard & Poor's

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