By Paul Cherney
This is the week of the Triple Witch, when the monthly stock and index option expirations coincide with the quarterly expiration of futures contracts. There can be some volatility as contracts wind to a close.
I have intermediate term indicators (based on end of day data) which are in positions which are usually followed by gains, but the VIX (volatility) index has to close below its 20 day exponential moving average, (roughly 25.80) to shift the odds higher that we could see a 3 to 5 day "net positive" run.
In Monday's session, the NYSE's TRIN (an index combining both advance/decline and up-volume/down-volume indicators) at the end of the session was 0.35. Closes under 0.40 are not that common. The recent record of price performance for the S&P 500 in the wake of excessively low (under 0.40) TRIN readings has not been great. For those who have access to historical charts, here are the dates of the last 5 times the NYSE TRIN has finished the day below 0.40: May 8, 2002; Apr. 16, 2002; Dec. 5, 2001; May 16, 2001; and Mar. 16, 2000 (which led into the March top).
Intraday indicators for the Nasdaq are in configurations which suggest that the index still has the potential for gains (small) on Wednesday, but these indicators are weakening so it is probably going to take a positive headline (Oracle?) to spur higher prices.
The S&P 500's intraday indicators are in a slightly stronger position.
Because this is the week of the Triple Witch, every movement of price is going to make dramatic price changes in leveraged instruments (futures and options) and there is a potential for the markets to open in one direction, make a move and then trip anxiety switches in the players caught on the wrong side of the move which could create some volatility as losing positions are abandoned (pushing prices further in the direction of the run before intraday winners take profits.
The Nasdaq has immediate resistance at 1554-1595. There is a focus of resistance at 1560-1570. The next thick resistance (above 1595) is 1620-1654.
The S&P 500 finished Tuesday's session inside a small focus of resistance at 1032-1037.80. There is thick price traffic at 1039-1047. The next resistance is 1065-1088.
Immediate Nasdaq support is 1526-1498. There was a gap opening on Monday, and if there is a retracement, a visit into the price gap could unfold; the price gap is 1519.26-1507.
Immediate intraday support for the S&P 500 is 1024-1009.
Cherney is chief market analyst for Standard & Poor's