Allan, we may have a reflexive rally, but really, I see no signs of a "meltup" Monday, there were absolutely no signs of extremes in sentiment indicators (the tick on both the NYSE and the NAZ did not reach -1000) and the volume was anemic at best. Right now, unfortunately I see more of a chance for a "meltdown" on Monday or at least a partially down market. It would be nice if we had statistics on how much of the crop of puts and call were "in the money" last Friday on the close.
It is true that when the market ends up on expiration the first few days of the following week are down and vice versa (when the market is down on expiry, the market rebounds the next week), but I believe this is true when Friday action's is strongly influenced by price engineering to inflict "Max Pains", when the decline or ascent are "intrinsic" (namely not engineered), the inverse response should occur, IMHO.
This because, typically, when stocks are called, they are bought back (to continue and write covered calls) providing some support, but if a lot of puts were in the money, I would guess that selling of the underlying stock may be expected. I think that the decline Friday was "intrinsic" and not engineered, and thus would not be surprised to see much lower prices Monday (as stock that was put to holders is now sold).
Zeev |
