Freaky Friday

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(click image to enlarge chart)

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Today is Quadruple Witching (aka ‘Freaky Friday’), when contracts for stock index futures, stock index options, stock options and single stock futures (SSF) all expire.

ES has been locked into a small range between 1230 and 1240 since contract rollover day more than a week ago.  Clearly, the pros have this right where they want it for this expiration.

We’ll have to see how the day goes after the cash market open and AM settlement, but the first obvious intraday constraints are the two range numbers mentioned above at 1230 to the downside and 1240 to the upside.

The recent local high is at 1242.25 and there should be bear stops sitting there from those who have been taking shots on the short side during the past week’s snooze-fest.  Just above that is a band of minor resistance between 1245-1247, another at 1255 and then the next S&T short-term target of 1263.75

Under 1230 is an open gap at 1227 and then the stop sweep/reversal line at 1219.75 (lining up approximately with S&T’s first countertrend sell line at 1217).

ES 1219.75 (1224.75 on expiring December contract) represents the line above which bears who missed the exit on December 1st have been squeezed since the early December breakout above the November pivot high at that number.  Stop sweep/reversal plays often take weeks to set up to allow sufficient time for those who are being squeezed to finally capitulate.  It remains to be seen if the recent activity above that line is part of a stop sweep/reversal setup, but it has been potentially behaving that way and fairly large numbers of recent internal spotter signals suggest caution is warranted to the upside.

Ideally, a tradable top—when it comes–will consist of a unanimous (or nearly so) alignment of top spotters across the broad market indexes with large numbers of individual issues internally.  Although the Dow and NASDAQ have initial (unconfirmed) spotters, the SPX and ES do not.  A pop above recent highs and reversal to a weak close might do it, but I mention that only as an intellectual exercise.  The odds remain with the bulls above 1217, and speculative top-picking without confirmation is an expensive habit.

The trend is your friend until it isn’t…and the macro trend has been up since December 1st at 1185, netting +52 points since that initial S&T short-term buy signal, where the bulls seized control.  The purple trident channel has been defining the trajectory since the turn with the centerline serving as current support.

All Stops and Targets trends are up > 1214.25

…my .02