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Random Thoughts: Expiration Influences Push Markets Around


Observations from the front.


Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.

Lots going on today-in the market, and life as a whole-so rather than produce some pithy prose in an attempt to sound smart, I'm borrowing some of the random vibes I've shared on today's Buzz & Banter.

Why, you ask, would someone subscribe to the Buzz if I cross over some of the content? That's easy: The Buzz, like financial markets, is in real-time, and it features a slew of human capital that can't be found anywhere else. But don't take my word for it, take it for a spin on us. Two weeks free-as in, free will!

In no particular order:
  • I returned from several meetings this morning to find the mainstay averages pretty in pink, European bourses mixed, and the high beta realm -- or, Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) anyway -- spitting out a few teeth.
  • If I were at my turret pre-opening (slacker), I would have shared that, following an outsized move, the tape tends to probe that direction (at least once) the following session. Looking at my trusty systems, this would appear to be the second probe.
  • How much of this week's price action is expiration and how much is performance anxiety in reverse? I can't say, but more likely than not a combination of both. That's what I meant when I said the buyers are higher and the sellers are lower, or Reactive Masses Await the Next Leg of the Stock Market. This tape is most certainly not for the weak of knees.
  • With the Dow Jones Industrial Average (INDEXDJX:.DJI) up 2.6%, the S&P (INDEXSP:.INX) up 7.5%, and the Nasdaq (INDEXNASDAQ:.IXIC) up 8.9%, the performance anxiety has shifted -- particularly for those who chased performance in September. That's why I often say, "Respect, but don't defer to, the price action. If you did that, you would buy high and sell low and that's a recipe for disaster."
  • The primary difference between yesterday and today is that the banks are trying to hold the line at BKX 37 (INDEXDJX:BKX) (the 200-day). While the S&P was the level of lore for the last few session (1380 is now resistance), this level for the financials is entirely more stealth, or at least it is outside of the 'Ville.
  • The market had every opportunity to rally this week; on Monday, the S&P was sitting on the 200-day, yesterday it was Turnaround Tuesday and today, despite oversold readings, nuttin' honey. Sometimes you can learn a lot just by watching.
  • As some of you don't read the Buzz -- and because I mentioned it yesterday on this side of the firewall -- I'll communicate that I punted my Apple calls yesterday when the stock was green and the tape couldn't catch a bid.
  • Market breadth is 2:1 negative
  • Note the price action in Facebook (NASDAQ:FB), which once again held the all-important $19 level.
  • The next level of support for the NDX is 2400, per the chart below. If it gets there on a whoosh, it'll likely be a snazzy spot for a Snapper through the lens of defined risk.
  • Did I mention that Festivus is 22 days away? 100% of the net proceeds from this year's event will benefit educational efforts for the children impacted by Hurricane Sandy. The three killer tribute bands (The Police, Journey, and U2), top-shelf liquor, all-you-can-eat BBQ, and 500 of the finest folks in our space, are the gravy.

Twitter: @todd_harrison

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