Summary
This year's first three expirations have not treated bulls at all well. However, it is the year's fourth such event that could be the real stinker!
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My recent "Red Alert" update discussed various levels that were important to the stock market. The January 2005 lows was one of them. Using my tracking group as a proxy, these were taken out marginally in yesterday's slide, with one notable exception -- the NYSE Composite.
The 11/2/04 closing levels are the next area of importance, and as the table below indicates, yesterday's respective closes were not significantly above them.
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SELECTED STOCK-MARKET MEASURES
(Ranked Versus January 2005 Lows)
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04/14 04/08 Jan. 11/02 % To 04/14 From
2005 2005 2005 2004 -----------------
Close Close Lows Close 04/08 Jan. Nov.
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NYSE Comp. 7064 7182 6984 6701 -1.0 1.1 5.4
S&P 500 1162 1181 1164 1131 -1.6 -0.2 2.7
Wil. 5000 11427 11635 11449 11075 -1.8 -0.2 3.2
DJIA 10279 10461 10369 10036 -1.7 -0.9 2.4
Value Line 375 385 379 366 -2.6 -1.1 2.5
Russ. 2000 592 611 605 585 -3.1 -2.1 1.2
NASDAQ 100 1441 1486 1481 1495 -3.0 -2.7 -3.6
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Average -2.2 -0.9 2.0
Median -1.8 -0.9 2.5
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First things first, however, which is what happens in today's expiration.
In this regard, a lot will depend on something the market may not reveal until early next week. To wit: How much stock for sale gets thrown back into the market from equity-option put contracts that were written naked and where there has been inadequate hedging during the current trading week's decline. Strike prices now in the money from GM and IBM alone could have an important bearing on the overall outcome.
Nevertheless, ingredients are in place for a nasty expiration, in which you must include next week's potential aftermath.
And there is something else that might aggravate the situation, due for release at 8:30 (ET) this morning. I speak of import prices for March. The Labor Department might out and out lie about them, but in the absence of this, this indicator of the inflation the United States is now importing from abroad should be relatively troublesome.
I'll get something out on this release after it occurs.
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