Quad Witching – be Alert

I haven’t had much commentary during this week, though there has been plenty to comment about, and with September options and futures expiring tomorrow, we can’t let it pass without a “heads up” call. The SPX has moved up to the top of the trading range we have been talking about for weeks, a range that has been in place since the May selloff. Volume has been more or less steadily contracting since then, but things are happening.

We should also note that currency markets are moving quite a bit over the last few weeks, and with central banks threatening intervention – some of them actually doing it – that is usually going to drive movement through the financial markets. Add in options expiration, and we could have some action, but so far this week has been relatively quiet.

Let’s look at some of the clues:

Many indices, like the SPX, are near the top of their summer trading ranges.

75% of NYSE listed stocks are above their 50 day moving averages, and 60% are above their 200 day.

Beaten down tech stocks are rallying this week, and they should be leading any breakout.

Short term momentum indicators are giving overbought readings.

In sum, while there isn’t an obvious directional signal, a bullish bias is in the data. I think you have to be prepared for any possibility here, but be ready for a buy signal for stocks going into next week. Over the weekend, we’ll recap as usual and look at some possible moves.

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