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| Stocks: Options Expiration, Plus, Some 2004-05 Benchmarks - Jan. 18, 2005 |
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Summary
At the beginning of each year, the battle cry of the folks at Tout TV and the other venues in the regular propaganda loop is, "as goes January, so goes the year." When the first week of the year is a positive one, the message is then emboldened to go something like, "as goes the first week of January, so goes January!" The first week of this January stunk, and the month to date isn't attractive, either. Meaning, of course, that what comes next is incrementally important to the bulls.
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Fortunately for the bullish camp, this four-day trading week leads into an options expiration and the potential manipulative "magic" frequently accompanying these events. Turning the market around to the upside last Friday was a hopeful sign for the bulls, particularly with some of the potentially onerous options positions that are on the books.
I did not do an extensive study over the weekend, but I did have a look at the S&P 500 (SPX) put contracts that are sitting on either side of Friday's close of 1,184.52. I put these in bands of approximately +/- 2% and +/- 3%. The former band gets you a range of roughly 1160 to 1210, with the latter coming in at about 1150 to 1220. Converted to five-point strike prices, the 2% band equals five strikes above and below Friday's close. The 3% band equals seven strikes above and below Friday's close.
There's sizable open interest sitting within these bands. The 2% band has 70,181 contracts below Friday's close, 86,831 contracts above it. The 3% band has 130,413 contracts below Friday's close, 77,506 above it. And there are also three sizable "bulges" -- 39,973 contacts at 1,150, 33,852 contracts at 1,175 and 42,795 contracts at 1,200.
Therefore, it will be an interesting week of, well, putting it crassly, screwer versus screwee!
Elsewhere, I've put together a couple matrixes I view as important in coming weeks. They appear in the table below.
The first contains standard breadth measures, with the cumulative results calibrated to 10/29/04 equals zero. The second contains results for four widely followed stock-market measures, with the close on 10/29/04 equaling 100.00 for the purpose of cumulative measurement.
I've chosen this starting point in the belief the Presidential election on 11/2 served as the excuse -- therefore, inflection point -- for certain parties to "help" (euphemism) prices move higher through year-end. To judge whether this was a "manufactured" move in values, I think we need to track the market's ability either to build on those gains or to dissipate them.
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SELECTED NYSE BREADTH MEASURES --
WEEKLY & CUMULATIVE DATA (10/29/04 = 0)
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Adv - Dec UVol - DVol 52W H - L Closing Tick
Week ----------- ----------- ----------- ------------
Ended Week Cum Week Cum Week Cum Week Cum
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2005
01/14 1366 14406 0.14 4.95 263 11873 1689 22478
01/07 -4633 13040 -2.97 4.81 287 11610 1145 20789
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2004
12/31 2269 17673 0.54 7.78 1193 11323 1950 19644
12/24* 2408 15404 1.31 7.24 1108 10130 1767 17694
12/17 2163 12996 1.02 5.93 1172 9022 2087 15927
12/10 -890 10833 -0.85 4.91 670 7850 1265 13840
12/03 370 11723 0.45 5.76 1684 7180 801 12575
11/26* 4213 11353 1.27 5.31 1229 5496 2745 11774
11/19 -560 7140 -0.39 4.04 1271 4267 2523 9029
11/12 3421 7700 1.69 4.43 1431 2996 2835 6506
11/05 4279 4279 2.74 2.74 1565 1565 3671 3671
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SELECTED STOCK-MARKET MEASURES -- WEEKLY
& CUMULATIVE RETURNS (10/29/04 = 100.00)
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Week S&P Russ.
Ended DJIA Index 500 Index NDX Index 2000 Index
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2005
01/14 10558 105.30 1185 104.87 1561 104.98 617 105.65
01/07 10604 105.75 1186 104.96 1565 105.25 613 104.97
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2004
12/31 10783 107.54 1212 107.26 1621 109.01 652 111.64
12/24* 10827 107.98 1210 107.08 1614 108.54 649 111.13
12/17 10650 106.21 1194 105.66 1597 107.40 642 109.93
12/10 10543 105.15 1188 105.13 1605 107.94 632 108.22
12/03 10592 106.63 1191 105.40 1614 108.54 642 109.93
11/26* 10522 104.94 1183 104.69 1578 106.12 631 108.05
11/19 10457 104.29 1170 103.54 1552 104.37 613 104.97
11/12 10539 105.11 1184 104.78 1558 104.77 622 106.51
11/05 10388 103.60 1166 103.19 1525 102.56 604 103.42
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10/29 10027 100.00 1130 100.00 1487 100.00 584 100.00
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*Four-day trading weeks.
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