Triple Witching Friday
Thursday’s session was cessation of
trading for most December index option contracts. The ER and then ES both made
sharp breaks lower in surge fashion early yesterday, then settled into a
sideways drift for 5+ hours hence. We should expect this type of price behavior
more often than not until Monday Jan 2nd 2006 arrives. The final week between
Christmas and New Years does have promise for some directional swings… up,
down or both.
S&P 500 cash index opened Jan 2005 at the
1213.43 level, now trading near 1270.94 prior to this day’s open. That +/- 60
index point gain in nearly twelve calendar months is a +4.9% rally if my math is
correct. Hardly the stuff index traders would get excited about via buy & hold
fashion. As for swing and intraday traders? A rise in VIX levels from current
decades’ lows sure will be nice when it happens.
S&P 500 weekly chart shows the current month of
December pinned between 1260 and 1280 on a closing basis. Three weeks… 20
index points top to bottom. Again, the epitome of sideways action.
Summation
December’s muted action and 2005’s overall year of rest are both due
for a break. Traders who just joined this game in the past year or two will
naturally think that what they currently see is what will project forward in
time as the standard of measure. Heck… that’s basic human nature to assume the
present equals the future.
Far from it. Traders who’ve been around a few
years (or decades) know better. Crude oil has not always swung thru $1,500 ~
$2,000 intraday ranges. Recent commodity traders who cut their teeth in the
crude complex cannot comprehend days of $200 ~ $500 intraday price ranges for
oil futures. That has persisted in the past and will surely do so in the
future… and the same wild swings for stock index markets will likewise return
from time to time.
I don’t know if 2006 will be bullish, bearish
or benign. And you know what? Neither does anyone else on Earth today! Financial
markets are incredibly hard to predict, but rather easy to follow. Get good at
trading in harmony with swing or trend moves and picking tops & bottoms becomes
irrelevant.
Today is option and futures expiry, aka “Triple
Witch” event coming to a close. Next week is a sandwiched period between
year-end and the spate of econ reports = events. I’ll take a break from this
forum next week for a brief respite before the real trading action begins.
Please have a safe, enjoyable and wonderful Christmas holiday. I’ll see you back
here on Monday 12/26, and good trading to you until then!
Trade To Win
Austin P
(Weekend Outlook trend-view section…
open access)
Austin Passamonte is a full-time
professional trader who specializes in E-mini stock index futures, equity
options and commodity markets.
Mr. Passamonte’s trading approach uses proprietary chart patterns found on an
intraday basis. Austin trades privately in the Finger Lakes region of New York.