I've seen it so, so many times. The stock market is strong, trending higher and the bottom drops out. Ever heard of "buy on rumor, sell on news"? That was partly responsible for the end of week selling. The Fed's policy statement on Wednesday indicated that our central bank had turned a bit more dovish, lowering interest rates another quarter point. After one more surge on Wednesday afternoon and into Thursday morning, the stock market rally abruptly ended. The other part, pure and simple, was market maker manipulation. Friday was quad witching, which is always the third Friday of March, June, September, and December. Yesterday was the third Friday of September. Quad witching is the day when stock index futures, stock index options, stock options, and single stock futures expire simultaneously. It's also the day when unsuspecting options traders can lose a fortune and other investors scratch their hands and wonder what just happened. Unfortunately, some read waaaay too much into it and believe a long-term downtrend has begun.
Let me give you an example of what I mean by manipulation. The QQQ, the ETF that tracks the NASDAQ 100 index ($NDX), is heavily traded in the options market. I don't want to get into a lengthy discussion about options, but I'll just say that several million dollars of call premium was erased by the decline from Thursday's intraday high to Friday's close. That's on just one option. Imagine how much money was made (or saved) by market makers across all optionable securities by the Friday decline.
EarningsBeats.com is hosting a FREE webinar at 11am EST this morning and everyone is invited. I want to discuss this market maker manipulation in a bit more detail. Trust me, this happens quite often and I have historical data to share that will back me up on this. More importantly, however, is that trading immediately after the Fed announcement and into Thursday gave me great insight into what we should expect in Q4 and I want to share it with you.
If you'd like to attend today's LIVE event, here's the link to our webinar room:
The room will open at 10:30am EST and will begin promptly at 11:00am EST. I hope you can make it. If you can't, no worries as we'll record the event. Just send me an email at "tom@earningsbeats.com" and I'll make sure you get a copy of the recording.
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."
