6/18/12
Stocks rallied again on Friday and the strength was somewhat surprising considering the elections being held in Greece over the weekend. But it was an options expiration Friday and sometimes the action can be a little "strange". The Dow gained 115-points.
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[TD="align: right"] F-fund:
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[TD] +0.14%
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[TD="align: right"] C-fund:
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[TD] +1.03%
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[TD="align: right"] S-fund:
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[TD] +1.05%
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[TD="align: right"] I-fund:
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[TD] +1.64%
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For the weekly and monthly TSP returns, please see our recent TSP Weekly Wrap-Up.
Last week was aquadruple witching option expiration week, which means 4 different types of option contracts expired. That can cause some interesting action in the markets and I would say that a triple digit gain in the Dow leading into Greece's elections was interesting.
By the way, the pro-bailout party prevailed in the election which seems to be helping markets in Sunday's overnight trading.
The S&P 500 broke out above the neckline of the recent inverted head and shoulders pattern, which is a bullish sign. It moved above the 50-day EMA and the indicators are looking positive.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
But this week in June, the week following options expiration week, is historically a struggle for stocks, particularly over the last several years. We've seen rallies during options week in June, but things seem to reverse the week after. The week following options expiration in June has been negative for 9 consecutive years with an average return of -1.39%. |
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Despite the futures being significantly higher as I write this Sunday night, and the fact that the indicators and charts are quite positive coming into the week, the negative trend for this post options expiration week is too strong to ignore.
Here are some of the charts of recent years highlighting the action of the Friday options expiration day and what happened in the following week plus...
2011 saw an immediate rally, but the week closed slightly lower. The interesting part was the post-expiration week market reversal of the pre-options expiration action, which as you will see in these charts, is quite common.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
So, we could open higher on Monday based on the positive developments in Greece this weekend, but I'm more interested in how investors react to a strong open and / or a strong Monday. A positive week would be the first post options expiration week in June since 2002.
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at www.tsptalk.com/comments.html
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