Quadruple Witching - was huge; and now skepticism remains appropriate again; but seasonally-tempered. Before the explosive rebound; I'd warned the Street wanted this to scream higher toward year-end and beyond (tax gain deferral plus performance comparisons).
The point is: other than a huge comeback; the background is unchanged, of course other than taking technicals from overbought to oversold; back to overbought in rapid succession. That's in harmony with December's call for up; then mid-month purge catching many off-guard; following by running a huge 'open-interest' short-squeeze crunch, up into Quarterly Expiration.
USA Today headlines their idea: a version of the 'Plunge Protection Team' appeared to 'rescue' the market; and we think that's not what happened. In fact, (similar to St. Louis Fed Bullard in October) the 'misinterpretation' or 'out-of-context' version of what Chair Yellen said that got the rally going.
It is 'that' statement providing an excuse to turn upside juice on; and as far as I can tell she was referring to ongoing policy; a 'tapering' and a backing-off of previously exhausted expansion policies. I think the Fed has a plan to ease-off, so (we explored some of the details of how it might unfold).
Hence there was no justification for the move; other than they could; and those huge 'open interest' positions impacted by both VIX rallies and stock declines, that needed to be closed in a New York minute. It is my view that the Expiration thus was the primary catalyst for explosive upside.
Bottom-line: that's pertinent, as it means nothing else encouraging visible to justify the move; so again means there's a rally on 'borrowed time'. This is so even if the pattern over the next two weeks evolves as we'd outlined.
Daily action - perpetual motion market characteristics are on borrowed time to say the least. Technical stalls have been totally-absorbed; but not perennially. Now of course it is year-end so one has to be nimble. I explore this via video in greater technical level detail and more.
For this weekend, after the past two weeks superb gains (mostly down) we hold the Friday afternoon short-sale (potential position-posture) at E-/mini March S&P 2075 as 'live guideline'. (More in the weekend video.)
Prior highlights follow:
Bottom-line: the stock market was (noted all month) on borrowed time. Now we have a post-FOMC move that many 'want' to believe in.
Let's see how it does after this eye-opening follow-through essentially in the wake of nailing the low before the rather spectacular turnaround.
Happy Holidays!
Gene
Gene Inger
www.ingerletter.com
