Expiration Hangover

Some random thoughts at the close as I have not yet fully digested today's action
  • In the early going there was a lot of call buying, the financials were lagging and the market was struggling. I chalked it up to the day after expiration but in hindsight these were warning sign that the bounce would fail.
  • I turned on CNBC today and there was a lot of talk of how scary Europe is and about another possible flash crash. This is quite the opposite of all the happy talk we were hearing a few weeks back.
  • The one missing ingredient in this correction has been time. It has been a little short from a duration perspective. 
  • Could margin calls have contributed to some of the late day weakness?
  • What will happen tommorow?
Have a good night.


PJ said...

The call buying early today made me comfortable sticking with my trading plan of putting back on some of the shorts I covered late last week.

But I was surprised by the late sell-off. I didn't get all the way in today, my plan was to put half back on today and half on Wednesday.

Re CNBC, it seems the atrocious long-term outlook is starting to dawn on people.

Upside on this rally is very limited. Look how buyers into the 3-day 5% rally after the flash crash got hammered in just a few weeks. Anyone who was willing to buy at these levels got smacked just a week ago, and will be more cautious now; and sellers will look to sell into any rallies. I thought we might have another 1-2% upside after Friday, but now I doubt it. We might get back to Friday's close if a few days can go by with no bad news.

Anonymous said...

From Dave Fry on the street.com....

Today investors showed their lack of confidence as they just couldn't push indices higher on follow-through higher from Friday. I interpret this to mean Friday was just an options related mechanical event.
If trends continue along these lines this week we may reenter the bear market by next week. That should be taken seriously. An old hand at this, Richard Russell, has told his subscribers last week to sell everything and just keep their bullion. He believes we will not recognize our country by the end of the year and he's in his 80s.