S&P Pursued by Bulls

By Jeffrey Cooper  MAR 20, 2009 11:29 AM

But will we see a lower close at expiration?

 


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She’s got a ticket to ride
And she don’t care.

-Ticket To Ride (The Beatles)

The S&P bottomed on March 6 at 667. March 6 is 90 degrees, or “squares” the price of 667. 803 vibrates directly off March 6 (it's also a conjunct March 6).

In other words, the date of the significant low resonates on the price of 803 S&P. That time and price square out is a place to look for the first meaningful pullback.


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However, with today being option expiration and the official start of spring, the indices may hold up until the weekend. The expiration should be controlled by the option expiration arbs, with the basket programs carving out either a 77.50 Spyder close or an 80 Spyder close.

I would trade most stocks on their own dynamics, with an eye to where they might be "pinned," as the basket programs will hold the indices hostage. This agenda was set up by profit-taking in the financials yesterday, while strength in the GLOBEX in energy before the open set the hook there, with the oil names picking up the slack.

As long as the S&P remains above 780, there remains a chance for a move back to 800 and the weekly close above the 50-dma. The bulls would like to score. Under 780 suggests a lower close for expiration.

If the index manages to claw its way back up -- offsetting the double Cup & Handle pattern on the 10-minute chart of the S&P shown in last night’s report and repeated here -- then the index may put in a pivot high for the week - i.e. a high (yesterday) surrounded by 2 lower daily highs.



Either way, the cycles point to the first 2- to 3-day reaction beginning on Monday at the latest - an option expiration hangover. The important thing to consider is that the buyers of the financials over the past 2 weeks will probably be sellers early next week, while the energy names will be buys on dips. The advance off the November 20 low was 203 points over 6 weeks. 203 points on top of the 667 low from March 6th gives 870 which is near the monthly swing high of 875. The primary target of 720 degrees up from low is 890. 540 degrees up from the March 6th low sets up as 830 S&P.
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If the index recaptures 830 this month with momentum, there's a chance the Monthly Swing Chart may turn up before the end of March. But it appears the greater likelihood will be that the Monthly Swing Chart turns up on trade above whatever the March high is in the first days of April. The strength of lack thereof at that point will be important to observe.

Conclusion: With Goldman Sachs (GS) and Apple (AAPL) at par, Google (GOOG) pinned to 330, Amazon (AMZN) nailed to 70, and Potash (POT) pinned to 80, it feels like the weekend is already here. Perhaps the market will trace out a narrow range session after the accelerated volatility of the last week. I wouldn’t get churned and burned in trying to ‘make’ something happen today. Sometimes the hardest trade to make is no trade.

Trading Lessons:


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