Sedated Expiration Week: January 17 - January 20

It is amazing the environment that we are in has not created a very sharp decline in commodity markets as well as stock trading. I expect that to be the case very soon. However, I am usually early in market predictions like these. This is expiration week and generally that atmosphere is conducive to more volatility and sharp moves. Movements so far have been to the upside. We are into resistance with the market trying to post the highs of the week. The fact that this is expiration does lend historical probabilities of a positive week, but also we generally see one sharply down day before expiration. Has this market been changed to not trade as free market? The S&P market journeyed through the 1280 since the beginning of 2012 and that has now become a support area. The bonds are probing toward the 144 price area as their overbought condition is very obvious. Wednesday sellers either overwhelmed the underlying bidder or he has lessened his bid positions. Either way the bonds are showing some heaviness.

An important trading tip to keep fresh in mind is to realize how the market is at various times of the month. The short-term environment of an expiration week is different than other weeks during the month. We are not seeing a lot of volatility, but the underlying upward push is present because of expiration. In spite of expiration shenanigans, our profit objective was still reached for the advisory trade. The bonds have corrected approximately 3 full points from the 145 ½ area that they probed this week. We were exceptionally overbought so therefore this correction was deemed to bring back equilibrium.

I have been studying intently how the computer programs are utilized. This past week perpetual maintenance programs (as I call them) influenced the S&P. Iceberg orders, print triggers and bid/offer triggers are some common ones. I discuss them in my seminars regarding their initiation process to manipulate markets. These are intended to keep prices from falling precipitously and they continue to keep the market buoyed. Although once they are removed it is like a man on a 50-foot stepladder and the leg breaks.

A tranquil mood overtook expiration Friday. It was not a very live market. I can remember many expirations that had frightening movements with high volume that would scare traders to emotional highs and lows. Those days apparently are done, beginning an era of docility. Has Bernanke killed yet another trading venue or at least rendered it comatose?

The NYSE Tick was quite lethargic. All week long there were very small amounts of high plus ticks or high minus ticks. The institutions are apparently on the sidelines, while the S&P 500 gained for the 3rd consecutive week of the year—over 4%. It’s the bullish start in 15 years. The movements generally are seen in the Globex sessions with the day sessions carefully imprisoned in narrowing ranges. Online trading at night or early morning seems to be the purist time to trade anymore. You can tell that are government does not understand the workings of markets. Imprisoning the S&P is like caging a ferocious wild animal.

The underlying bidder that was prevalent the first part of January vacated the bonds premises this week. It has fallen over 3 1/2 points. Could bonds finally be showing the wear and tear of manipulation and the heaviness thereof? The old bull in the bond market has become ancient. Once again the Fed does not have a clue.