Post-Expiration Blues?
By
Rennie on Wednesday, September 15th, 2010 at 9:21 pm
Wednesday’s selloff in utilities caught my eye, specifically the fact that the Dow Utilities Index posted its lowest close in ten sessions on the same day that the S&P500 posted its highest close in ten sessions. That’s only occurred 14 times since 2000, with the S&P coming under pressure over the next two sessions in all but one case… (prior to 2000 there was no negative bias)
Utilities Close at 10-day Low, S&P at 10-day High
09/15/10… S&P500 ??? two sessions later
01/05/10… S&P500 +0.5% two sessions later
07/23/08… S&P500 -1.9% two sessions later
03/25/08… S&P500 -2.0% two sessions later
01/12/07… S&P500 -0.0% two sessions later
09/20/06… S&P500 -0.8% two sessions later
09/15/06… S&P500 -0.1% two sessions later
01/30/06… S&P500 -0.2% two sessions later
11/11/05… S&P500 -0.5% two sessions later
12/01/04… S&P500 -0.0% two sessions later
07/07/03… S&P500 -0.2% two sessions later
05/16/02… S&P500 -0.6% two sessions later
11/19/01… S&P500 -1.2% two sessions later
01/03/01… S&P500 -3.7% two sessions later
06/02/00… S&P500 -1.3% two sessions later
Our version of Standard & Poors Oscillator closed over 7.0 on Tuesday, so this will be an indicator to watch heading into the middle of next week. Readings over 7.0 signal an overbought market, but if the S&P manages to hold up in the week following a 7+ reading, it’s an intermediate-term bullish sign. I’m not expecting that to occur, but it’s something to put on your radar.
It’s been a couple of months since we last checked in with the activity of ‘large traders’ in E-Mini S&P futures, as classified in the weekly Commitments of Traders reports. You may recall that this group historically maintains a net position contrary to the prevailing trend, yet in the last few years this formerly contra-trend group suddenly appears on the right side of the market, not just occasionally but on a regular basis. Here’s the updated look at this group’s activity over the last four years…
Large Traders Net Position in ES Futures
10/20/06 Long SPX 1368… +1.4%
03/02/07 Short SPX 1387… +4.1%
01/25/08 Long SPX 1330… +4.9%
02/01/08 Short SPX 1395… +33.3%
11/07/08 Long SPX 930… +25.4%
03/26/10 Short SPX 1166… +2.7%
05/14/10 Long SPX 1135… -6.3%
06/04/10 Short SPX 1064… -2.5%
06/11/10 Long SPX 1091… +2.4%
06/18/10 Short SPX 1117… +8.5%
07/02/10 Long SPX 1022… +4.1%
07/16/10 Short SPX 1064… -3.6%
07/23/10 Long SPX 1102… -0.1%
07/30/10 Short SPX 1101… +2.7%
08/20/10 Long SPX 1071… +3.5%
09/10/10 Short SPX 1109… ???
This Friday is triple witching expiration, which from a seasonal perspective ushers in a challenging time for stocks through the end of September. Stocks are already under seasonal pressure from the post-Labor Day selloff, so this will add another significant headwind beginning next week. The table below highlights the S&P500′s performance from the close on triple witching through the last trading day of September for every year since 1980…
S&P Performance from Sep Expiry until End of Month
09/17/10 – 09/30/10… S&P500 ???
09/18/09 – 09/30/09… S&P500 -1.1%
09/19/08 – 09/30/08… S&P500 -7.1%
09/21/07 – 09/28/07… S&P500 +0.1%
09/15/06 – 09/29/06… S&P500 +1.2% (*)
09/16/05 – 09/30/05… S&P500 -0.7%
09/17/04 – 09/30/04… S&P500 -1.2%
09/19/03 – 09/30/03… S&P500 -3.8%
09/20/02 – 09/30/02… S&P500 -3.6%
09/21/01 – 09/28/01… S&P500 +7.8% (*)
09/15/00 – 09/29/00… S&P500 -2.0%
09/17/99 – 09/30/99… S&P500 -3.9%
09/18/98 – 09/30/98… S&P500 -0.3%
09/19/97 – 09/30/97… S&P500 -0.3%
09/20/96 – 09/30/96… S&P500 +0.1%
09/15/95 – 09/29/95… S&P500 +0.2%
09/16/94 – 09/30/94… S&P500 -1.8%
09/17/93 – 09/30/93… S&P500 +0.0%
09/18/92 – 09/30/92… S&P500 -1.2%
09/20/91 – 09/30/91… S&P500 -0.0%
09/21/90 – 09/28/90… S&P500 -1.7%
09/15/89 – 09/29/89… S&P500 +1.2% (*)
09/16/88 – 09/30/88… S&P500 +0.5%
09/18/87 – 09/30/87… S&P500 +2.2% (*)
09/19/86 – 09/30/86… S&P500 -0.4%
09/20/85 – 09/30/85… S&P500 +0.0%
09/21/84 – 09/28/84… S&P500 +0.2%
09/16/83 – 09/30/83… S&P500 -0.0%
09/17/82 – 09/30/82… S&P500 -1.7%
09/18/81 – 09/30/81… S&P500 -0.0%
09/19/80 – 09/30/80… S&P500 -2.9%
In 19 out of the last 30 occurrences, or 63% of the time, the S&P traded lower from September’s expiration until the end of the month. That’s significantly greater than the 42% random chance for a lower S&P ten trading days later (a rough estimation of the average number of days from expiration until month-end). In only four cases out of thirty did the S&P gain more than 0.5%, while it fell more than 0.5% thirteen times.
Post-Expiration Blues?
By Rennie on Wednesday, September 15th, 2010 at 9:21 pmWednesday’s selloff in utilities caught my eye, specifically the fact that the Dow Utilities Index posted its lowest close in ten sessions on the same day that the S&P500 posted its highest close in ten sessions. That’s only occurred 14 times since 2000, with the S&P coming under pressure over the next two sessions in all but one case… (prior to 2000 there was no negative bias)
Utilities Close at 10-day Low, S&P at 10-day High
09/15/10… S&P500 ??? two sessions later
01/05/10… S&P500 +0.5% two sessions later
07/23/08… S&P500 -1.9% two sessions later
03/25/08… S&P500 -2.0% two sessions later
01/12/07… S&P500 -0.0% two sessions later
09/20/06… S&P500 -0.8% two sessions later
09/15/06… S&P500 -0.1% two sessions later
01/30/06… S&P500 -0.2% two sessions later
11/11/05… S&P500 -0.5% two sessions later
12/01/04… S&P500 -0.0% two sessions later
07/07/03… S&P500 -0.2% two sessions later
05/16/02… S&P500 -0.6% two sessions later
11/19/01… S&P500 -1.2% two sessions later
01/03/01… S&P500 -3.7% two sessions later
06/02/00… S&P500 -1.3% two sessions later
Our version of Standard & Poors Oscillator closed over 7.0 on Tuesday, so this will be an indicator to watch heading into the middle of next week. Readings over 7.0 signal an overbought market, but if the S&P manages to hold up in the week following a 7+ reading, it’s an intermediate-term bullish sign. I’m not expecting that to occur, but it’s something to put on your radar.
It’s been a couple of months since we last checked in with the activity of ‘large traders’ in E-Mini S&P futures, as classified in the weekly Commitments of Traders reports. You may recall that this group historically maintains a net position contrary to the prevailing trend, yet in the last few years this formerly contra-trend group suddenly appears on the right side of the market, not just occasionally but on a regular basis. Here’s the updated look at this group’s activity over the last four years…
Large Traders Net Position in ES Futures
10/20/06 Long SPX 1368… +1.4%
03/02/07 Short SPX 1387… +4.1%
01/25/08 Long SPX 1330… +4.9%
02/01/08 Short SPX 1395… +33.3%
11/07/08 Long SPX 930… +25.4%
03/26/10 Short SPX 1166… +2.7%
05/14/10 Long SPX 1135… -6.3%
06/04/10 Short SPX 1064… -2.5%
06/11/10 Long SPX 1091… +2.4%
06/18/10 Short SPX 1117… +8.5%
07/02/10 Long SPX 1022… +4.1%
07/16/10 Short SPX 1064… -3.6%
07/23/10 Long SPX 1102… -0.1%
07/30/10 Short SPX 1101… +2.7%
08/20/10 Long SPX 1071… +3.5%
09/10/10 Short SPX 1109… ???
This Friday is triple witching expiration, which from a seasonal perspective ushers in a challenging time for stocks through the end of September. Stocks are already under seasonal pressure from the post-Labor Day selloff, so this will add another significant headwind beginning next week. The table below highlights the S&P500′s performance from the close on triple witching through the last trading day of September for every year since 1980…
S&P Performance from Sep Expiry until End of Month
09/17/10 – 09/30/10… S&P500 ???
09/18/09 – 09/30/09… S&P500 -1.1%
09/19/08 – 09/30/08… S&P500 -7.1%
09/21/07 – 09/28/07… S&P500 +0.1%
09/15/06 – 09/29/06… S&P500 +1.2% (*)
09/16/05 – 09/30/05… S&P500 -0.7%
09/17/04 – 09/30/04… S&P500 -1.2%
09/19/03 – 09/30/03… S&P500 -3.8%
09/20/02 – 09/30/02… S&P500 -3.6%
09/21/01 – 09/28/01… S&P500 +7.8% (*)
09/15/00 – 09/29/00… S&P500 -2.0%
09/17/99 – 09/30/99… S&P500 -3.9%
09/18/98 – 09/30/98… S&P500 -0.3%
09/19/97 – 09/30/97… S&P500 -0.3%
09/20/96 – 09/30/96… S&P500 +0.1%
09/15/95 – 09/29/95… S&P500 +0.2%
09/16/94 – 09/30/94… S&P500 -1.8%
09/17/93 – 09/30/93… S&P500 +0.0%
09/18/92 – 09/30/92… S&P500 -1.2%
09/20/91 – 09/30/91… S&P500 -0.0%
09/21/90 – 09/28/90… S&P500 -1.7%
09/15/89 – 09/29/89… S&P500 +1.2% (*)
09/16/88 – 09/30/88… S&P500 +0.5%
09/18/87 – 09/30/87… S&P500 +2.2% (*)
09/19/86 – 09/30/86… S&P500 -0.4%
09/20/85 – 09/30/85… S&P500 +0.0%
09/21/84 – 09/28/84… S&P500 +0.2%
09/16/83 – 09/30/83… S&P500 -0.0%
09/17/82 – 09/30/82… S&P500 -1.7%
09/18/81 – 09/30/81… S&P500 -0.0%
09/19/80 – 09/30/80… S&P500 -2.9%
In 19 out of the last 30 occurrences, or 63% of the time, the S&P traded lower from September’s expiration until the end of the month. That’s significantly greater than the 42% random chance for a lower S&P ten trading days later (a rough estimation of the average number of days from expiration until month-end). In only four cases out of thirty did the S&P gain more than 0.5%, while it fell more than 0.5% thirteen times.