Option Expiration Week – Crazy As Ever

July 17th, 2009

Yesderday’s spike up clearly broke the downtrend on the daily chart as I mentioned in the trading video last night.  One thing that is pretty amazing is how the market just paused with a brief sideways consolidation instead of pulling back to retrace even a part of the bounce that has taken place this week (see BLUE oval). The “problem” is with how overbought and over extended this move is on the shorter term charts.  These kind of conditions make it a very high risk entry for anyone thinking about taking a long position, as the risk of a pullback are very high. Per the chart of the S&P 500 below, you can see that the next area of support is not until 930 then 905 after that.

 

spx17

 

So when we tie all of this together it is telling us that this has been an unusual rally, one that has become quite overbought and over extended.  One that by all means can earn a spot on the shelf as one of the most dramatic moves during option expiration week. Now that we are into this 950-ish area again, more than likely we are going to see some huge swings as we fight through the over-head supply.

 

In all accounts, I’m ready for this crazy week to be over. Thank God we had our stops in place to lock in profits or else things would have been much worse. Though I can’t complain that much considering the OPTION WRITERS reached it’s profit goals once again this month and we are closing out all our positions today with a profit – ALL of them!

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