Summary
Stocks needed help from the January options expiration. It was not forthcoming. Is history repeating itself this month?
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Stocks went into the tank in January. The stock market surely could have used some of the upside "magic" (euphemism for "manipulation") that options expirations usually provide. The magic definitely was not much in evidence during the week ended 1/21, however.
So far and on a net basis, the market has had a much better time of it during February. Still, to keep the better times rolling along, to push more bellwether measures beyond their 2004 highs, to prevent important proxies from failing at critical levels, the market sure could use (or could have used?) the positive juice it usually gets from an expiration. You can be sure that coming into this week, many bulls assumed that this was exactly what this week's expiration would provide.
Perhaps it still will. Maybe today will be a one-day wonder. If so, yesterday was not a stupendous segue. My tracking group was down an average 0.9% on the day (median decline = 0.8%), with losses running in a range of 0.5% for the NYSE Composite, to 1.5% for the NASDAQ 100.
Following is a summary of how yesterday's close shaped up against the tracking group's 2004 highs, all set in late December. Those highs also were recovery highs, from respective lows established in 2002.
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SELECTED STOCK-MARKET RETURNS
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02/17 2004
2005 High 02/17 Vs.
Close Close /Date 2004 High
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NYSE Comp. 7273 7254 12/30 +0.3%
DJIA 10754 10855 12/28 -0.9%
S&P 500 1201 1214 12/30 -1.1%
Wilsh. 5000 11841 11988 12/30 -1.2%
Value Line 394 405 12/30 -2.7%
Russ. 2000 631 655 12/28 -3.7%
NASDAQ 100 1519 1625 12/29 -6.5%
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Average -2.3%
Median -1.2%
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The above numbers certainly are a good indication of the critical levels at which these key measures currently sit. Any pullback of significance from around this area certainly could take on the appearance of an important "fail."
As today's expiration draws closer, there are some key index option levels you might find fun to watch, as the bulls and bears square off and fight it out in the trenches.
The S&P 500 closed yesterday at 1200.75. There is open interest of more than 41,000 put contracts with a strike price of 1200. On the other side of the book, there are 37,000+ call contracts with a 1200 strike.
The QQQQ finished yesterday at 37.47. There is open interest of more than 193,000 put contracts with a strike price of 37, and another 184,000+ contracts with a 36 strike. On the call side, there are 103,000+ contracts with a strike of 37, and another 174,000+ contracts with a 38 strike.
I did not check the "Diamonds." But with the DJIA closing yesterday almost exactly between 10,700 and 10,800, there are likely some positions of interest here, too.
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