Friday was triple witching day, meaning that stock options, stock index options and stock futures contracts were all due to expire. This happens four times a year and can lead to increased volume, as money is moved around resulting in sometimes unusual (or spooky) price action.
The S&P 500 (SPY), Nasdaq 100 (QQQ) and Dow Jones (DIA) all closed under their previous day's close, while the Russell 2000 (IWM) held over its previous day close. The odd behavior of these 3 indices on a triple witching day leads me to believe they might be the witches of today's market.
This reminds me of a great satirical movie called Monty Python and the Holy Grail, which in one scene depicted the 13th century townsfolk using common logic to figure out if someone is a witch. They decide that, because it's common practice to burn witches, witches must burn because they are made of wood.
Wood floats on water. Ducks also float on water. Therefore, if a person weighs the same as a duck, they are a witch! (Here is a link to the clip.)
With that said, we should listen to what the indices have to say and decide for ourselves whether it's meaningful or if they are speaking in tongues.
The QQQs broke to new highs last Wednesday when it cleared 308.60. Though it dipped to 307.61 Friday, QQQs closed over the 308.60 support area.
SPY was also able to hold an important support level from the 10-day moving average at 368.50. Below that is support from the previous week's low at 363.26.
The DIA is also holding over its 10-DMA at 301.50, which means it's safe for now. Also seemingly safe, the IWM sits not far from the highs and is currently above the 10-DMA.
It looks as though the indices have passed their witch trial... for now. A break of their key support levels would make them questionable and give us reasons (as in Monty Python) to weigh them against a duck.
Of course as the market obviously weighs considerably more than a duck, we do believe that the Friday sell-off could be nothing more than a one day event.
Mish covers "Fast and Fast Casual" food in this week's episode of StockCharts TV's Mish's Market Minute. Taking a deeper look into stocks that are disrupting the food market by using technology to enhance the consumers experience. These stocks are investing in things such as: app ordering, prediction of order based on license plate scanning, automated ordering, different payments methods, and much more.
- S&P 500 (SPY): Support 363.26 if can't hold the 10-DMA at 368.50
- Russell 2000 (IWM): Support 192.03 the 10-DMA
- Dow (DIA): 298.68 support. 303.80 to clear
- Nasdaq (QQQ): Holding over 308.60, with more support the 10-DMA at 306.26
- KRE (Regional Banks): Resistance 200-week moving average 52.70 to clear. Support 48.48
- SMH (Semiconductors): 221.79 high to clear. Support 210.41. If cant hold, 10-DMA at 216.82
- IYT (Transportation): Looking for a close over the 10-DMA 222.90
- IBB (Biotechnology): 152.13 level to hold. 156.40 high to clear.
- XRT (Retail): 62.16 support
Mish Schneider
MarketGauge.com
Director of Trading Research and Education
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education
