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MrTopStep Best of 2012: THE SEPT QUAD WITCH AND T+3


There is a lot of talk floating around out there that the S&P is at or near its high, that the “news is out” and it’s time for a pullback. In most cases we would agree, but right now we just do not see any change in the current patterns to think the market is at a turning point. Saying that, we know the S&P still could hit a “false start” at any minute, but we just don't think we are at that juncture yet, and here are the reasons why:

  • The current “back and fill” pattern of making a new high, pulling back 20 or 30 handles and then going back up has not changed.
  • The S&P cash study for the September expiration Friday has been up 17 / down 11 of the last 28 occasions and according to the Trader’s Almanac the Dow has been up 7 in a row.  
  • The last 3 days of the quarter (T+3) and the first 3 days of the new quarter are up.
  • Money moving out of bonds and into stocks.
  • Underinvested investment funds chasing year-end returns.
  • Bullish presidential cycles when an incumbent is in the lead.
  • And last but surely not least: QE3 PLUS.

But, and there is always a but: This week actually has a bad reputation, and so does the end of September. Expiration week 2001 the Dow lost 1,370 points or 14.3%, the second-worst weekly point loss ever and the fifth-worst week overall. While the Quad Witch is up, the week after it has the Dow down 16 of the last 21 occasions with an average loss of about 1% since 1990. Historically the end of September is prone to weakness from the end of the Q3 institutional portfolio restructuring. And the last trading day of September falls on Friday the 28th, which has the Dow down 10 of the last 14 occasions, although the day also saw a massive 4.7% rally in 2008. Then, to make things worse, Monday, Oct. 1,  has the Dow down 4 out of the last 6 occasions and down 2.1% in 2011. And making things even worse, the week ending Oct. 10, 2008, was the worst week in the history of the Dow, down 1,874 points or a whopping 18.2%. October is known as a “spooky” month but we will have to wait to see if the current up move is a trick or a treat.

We will end this by saying that while the S&P may be heading into a historically troubled time for the markets, November starts the best six months for stocks and the election.

MrTopStep Closing Print Video: http://www.mrtopstep.com/closing-print-moc-24-of-the-dow-30-were-to-buy-moc-buy-450mil/

Our view: The Asian and European markets are down again this morning on growth concerns. Asia is getting slammed. Yesterday we said to sell the rallies, but the ESZ had a small selloff after the open but rallied most of the day until it sold off late. The price action has followed through on the downside this morning. All week we thought we would come down a bit and then rally late into the week as we go into the expiration, and we still feel that way. Our view is to sell the early rallies and then start looking for a good spot to be a buyer. Despite what's going on overseas, we still think the S&P has further to go. As always, keep an eye on the 10-handle rule and please use stops.

  • It’s 6:00 a.m. and the ESZ is down 3.75 handles, crude is down 83 cents at 91.47 and the EC is trading 1.2967, down 107 ticks.
  • In Asia 10 out of 11 markets closed lower (Shanghai Comp -2.08%, Hang Seng -1.20%).
  • In Europe 10 out of 12 markets are trading lower (CAC -0.56%, DAX -0.41%).
  • Today’s headline: “Stocks, Commodities Fall on Growth Concerns; Bonds Climb.”
  • Economic calendar:  Today:  Jobless claims, Philadelphia Fed survey, leading indicators, Fed's Kocherlakota speaks; earnings from CarMax, ConAgra, Rite Aid, Oracle. FRIDAY: Quadruple witching, Fed's Lockhart speaks, iPhone 5 shipping date.
  • VOLUME: 1.65mil ESZ and 23k SPZ traded
  • SPREADS: 18k SPU/Z spreads traded
  • FAIR VALUE: S&P-4.50, NASDAQ -9.50

S&P cash Expiration Study for September:

  •      Thursday         Up 16 / Down 12 of the last 28 occasions
  •   Friday             Up 17 / Down 11 of the last 28 occasions


The Bank of Japan joins the central banks surprise stimulus club, chatter was possible action next month. The BOJ action led Greg to note: in the very near term, the possible 2000lb Gorilla in the room is still China easing. Xi JinPing is not gonna be standing on the sidelines - is he? Interesting central banks moves to say the least. Although the crude price action, plummet actually, continues to lead this week's headlines. FT ran an article on Sunday: Saudis offer extra oil to offset price rises - Largest exporter worried about impact of high crude prices. This morning OPEC Head: No Shortage Of Oil Anywhere On Earth. Stanton_Analytics Crude: Margin selling and the big build in crude numbers is due to two reasons: The Saudis are pumping above 10 MM b/d and the shut-ins from the Hurricane are back fully. Oh, the surprise build crude +8.5M in inventories added additional pressure. The 8% drop this week will be a welcome relief in the coming week(s) when the consumers may see it at the pump, assuming nothing happens between now and then...

Midmorning observation: Is there a bump in the road?  (Reuters) - The head of the European Central Bank, Mario Draghi, will discuss the state of economic and currency union in the euro zone with German Chancellor Angela Merkel in Berlin next Tuesday, a senior German source said on Wednesday. Also, Moody’s rating agency reiterates the outlook for the US remains negative, reflecting ongoing macroeconomic risks and persistent budgetary challenges.

Wednesday started with 335k ESZ and 2k SPZ traded on Globex, trading range 1459.25 – 1453.00 / Tuesday’s pit range 1455.20 – 1449.70, settled at 1452.90 down 1.1 handles. Today’s RTH’s gapped 2 handles higher at 1455.00 – 1454.50 marking the early high. Early, continued weakness in crude, testing $93.00 post open and the DJT were down nearly 50 points as the spoos were trading 1451.70 morning low. At 9:00 another firm housing report offset the disappointing permits number premarket. The existing home sales, 4.82 vs 4.55 gave the  spoos a push to print new highs of 1456.80. After a small pullback another buy program pushed the spoos to 1458.00 as the DJT were up 25 points. The sideways to slightly higher grind produced a 1459.20 print by 12:13 followed by sideways trade in the upper end of the range going into the cash close. Going into the 2:45 cash close the SPZ was trading around the 1457.50, at 2:45 24 of the Dow 30 were to buy and the broader market moc showed buy 450mil. On the 3:00 cash close the SPZ traded 1454.65 before settling at 1452.90, up .20 handles on the day. UNCH’D on the day & a DOJI.  

MTS video: Top Notch http://www.mrtopstep.com/9-19-2012-tim-haefke/






Roger Volz, BGC Partners


SP 500 Futures 60 min Chart and Indicator (Dec roll) …. Slips into lower consolidation range below 1455.00; working  (1459.25- 1446.25 as the immediate outside range basis the 60 min chart); with higher low base forming against the 89-pd SMA at 1449.00.     
ST OB > 1485.00   /// ST OS < 1421.25

VST 5 min ……nudges VST OS at 4:15am in globex session < 1449.50 ….wedging with lower high / higher low…….VST 5min  OB > 1459.25 from 1464.25  /// VST OS < 1448.75 from 1451.50
VST 15 min ……just misses a 15 min OS reading in globex session targeted < 1448.00; seeing measure of repair > 1453.50  …..VST 15 min OB > 1467.25 from 1476.75  /// VST OS < 1444 from 1448

SP1 Daily Resists …..…..1459.00-1460.00-1461.00……1467.00….1475.00…..1478.00…………1492.00……………1506
SP1 Daily Supports….1451.50……1444.………1431.00…1427.00…..1422.00-1420.00 ….. 1413.00 …. 1405….1401.00/ 1399…..1390.00…….1382.00
SP1 Daily OB > 1475.00 from 1459.00 ///   SP1 Daily OS < 1343.00 form 1325.00

SP 500 Futures 60 min Chart






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