Stock Market Analysis

Thursday, September 16, 2010

Quadruple Witching Friday

The Dow closed slightly higher by 22 points today due to complex covering and buying ahead of tomorrow's Quadruple Witching day.

Fundamentals
The market was completely technical driven today as it opened deep in the red on better than expected jobless claims and then rise through the day on worse than expected Philley Fed. Such turbulent trading pattern is typical ahead of tomorrow's Quadruple Witching day. Quadruple witching is when four different classes of derivative instruments expire on the same day, leading to an exceptionally high volume and volatility trading day. However, quadruple witching days are not known to be days of huge moves in the market as all the covering and selling in the market keeps prices within a tight range.

Technicals
Like I said in my analysis yesterday (which only paid subscribers would recieve in email), the S&P500 continues to have problems at its current 1125 resistance level. Even though the Dow and the Nasdaq composite both closed higher, the S&P500 closed lower by a marginal 0.04%. We should not be getting any big moves on Friday since its quadruple witching day but the worse than expected Philley fed should catch up by next week, leading to a lower week. Indeed, all major indices need that slight pullback before they have the real energy to stage a breakout.

For now, the Dow remains in a short term bull trend, intermediate bull trend within a primary bull trend.
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