Options Expiration Week: June 11 – June 15

Monday showed how effective news can be in short burst of time. However, the end result is always the most important. We were able to spike through 1330 but that short power move was all predicated on news. The basic internals of the market are still damaged. The bonds have not yet breathed their last gasp. They did make a lower low in the overnight but need to stay at the lows with consecutive days of lower highs and lower lows. A short-term resistance now is just above 150 ¼. Failure to reach that, as the stocks are declining, would exhibit internal weaknesses. Apparently the Europe situation is not lessening its grip on creating fear. I have for many years gauged the NYSE tick against the movement in the S&P futures. Tuesday, the plus tick did not move the S&P futures the corresponding amount that should have been registered. Also, on declines and prices there was not significant minus tick. This means that the market is not being allowed to have normal ebb and flow. A free market must emerge, whereby the tick flows above plus 1000 and below minus 1000 and reciprocates quickly in a counter move. Our advisory trade recommendation was reached on the S&P.

The fact that we journeyed through a previous resistance and declined Monday is a negative situation. Tuesday we were unable to rally to levels even close to the previous day session. Therefore, this market is showing a deteriorating pattern. Keep in mind we have not seen a capitulation tick as of yet which would require a minus 1400 or greater.

The tide flows in and the tide flows out. This is done on a regular interval with the movements offsetting each other almost perfectly. This is how the chart pattern appears for Wednesday’s trading action. The downside repelled and ascended. This afternoon the downside flowed once again with the question, will the tide offset or become a tsunami?

The mid-week bond rally created a potential shorting opportunity once again. Therefore I am watching a key resistance at 149 ¾ and then 150 ¼. If this is a fear factor rally because of the European situation, the resistance should provide a good indication that the bonds are running low on energy if that provides a failure point. The next couple days could be important for the intermediate term movement of bonds.

I think the market is in a holding pattern of wait and see regarding the European situation. It was expiration week and generally there is volatility, which makes me think that the market is stymied because of less players and more concerns. We are not generating plus NYSE tick in any duration but today the minus tick has dropped dramatically. This type of environment is building energy so be AWAKE!

On Expiration Friday, with the European situation looming on the horizon there appears to be no fear. The internals tell me that there is fear but probably the Federal Reserve is offsetting a potential decline with sufficient buying to offset the selling. We are into a rare period in history whereby the United States market is no longer a United States market. It is a United States market dominated by European influences. The bonds journeyed to just above 150 and again failed. This congestion area between 149 ¾ to 150 ¼ is becoming very prominent on a chart. Fear is still great but the reality is showing that unless we see a close above 152 ½, the bonds are definitely trying to fly with their wings clipped.