By Paul Cherney
The trading range persists and the historical chances for some sort of a price move greater than 1% (in either direction) for Friday, June 18, are slim. Based on S&P 500 data since 1986 (18 occurrences), the Friday of June Triple Witches (when the monthly stock and index option expirations coincide with the quarterly expiration of stock and index futures contracts) has seen a closing gain or loss of more than 1% only 3 times: 1986 (+1.44%); 1993 (-1.08%); and 2002 (-1.70%).
Three out of 18 times is only 17% of the time so the odds historically since 1986 are only about 1 in 5 that there is a 1% movement as of the close (Friday). Ten out of 18 times, the S&P 500 managed to close with a gain for the day. Ten out of 18 is only 56% of the time.
The first trade day after the June Triple Witches has a greater probability of seeing closing gains or losses of greater than 1%. Since 1986, 5 out of 18 times (28% of the time) the S&P 500 has posted a closing gain or loss of greater than 1%.
The first trade days after the June Triple Witches that experienced a move greater than 1% (either direction) were: 1990, -1.66%; 1991, -1.80%; 1997, -2.23%; 2000, +1.47%; 2003, -1.41%.
But making a bet on direction (gain or loss) for the first trade day after June Triple Witches is truly a coin-toss; out of 18 June Triple Witches since 1986, 9 were followed by gains and 9 were followed by losses on the first trading day after Friday.
The overnight systems run on Thursday, June 10, produced two minor signals with negative implications. NYSE and Nasdaq volume measures and NYSE breadth measures suggest sideways trading, with a negative bias, but secondary measures are not following patterns evident after the prior two signals. Until the markets can demonstrate an ability to move higher and close above resistance, I have to assume that there is still a chance for short-term downside risk of a close for the S&P 500 in the 1,118-1,110 area by the close on Monday, June 21. Chart evidence that I was wrong about short-term downside risk would increase if prices were simply able to close above S&P 500 1,137.36 or Nasdaq 2,006.79. A short-term upside leg would be expected if the S&P 500 can close above 1,142.18 and/or the Nasdaq managed to close above 2,023.
The CBOE volatility index, or VXO, is very close to its 10-day exponential moving average. Stock prices usually move higher when the VXO is moving lower. Near the close on Thursday, the 10-day exponential moving average of the VXO was 15.28.
The shelves of price action established midday on Wednesday, June 9, represent the most important immediate short-term resistance levels. Those midday shelves are Nasdaq 2,001-2,006.79, S&P 500 1,134.34-1,136.53. In the session on Tuesday, June 15, the S&P 500 managed to spend some time above 1,136.53, with an intraday high of 1,137.36, so that now becomes the upper edge of immediate intraday resistance for the S&P 500: 1,134.34-1,137.36.
S&P 500 support is 1,129-1,009.91, with a concentration of price action 1,125-1,113. Next support: 1,102.77 to 1,078, with a focus at 1,097-1,085.
Nasdaq immediate support is 1,996-1,982.41, then 1,977-1,963.48. The lowest print for the Nasdaq over the past 15 trading days has been 1,957.58; a close below this level would open downside risk for a test of the next layer of support at 1,934-1,913.73. Overlapping support is 1,918-1,899, so the 1,918-1,913 area is focus of support.
Cherney is chief market analyst for Standard & Poor's