Pre-Expiration Week Strength

When the market moves steadily higher in the three days prior to options expiration week, the S&P has a strong track record of continuing to push higher over the next 2-4 sessions. Here’s a look at each of the last 30 instances in which the S&P closed higher three consecutive days prior to options expiration week…

S&P Closes Higher Three Consecutive Days Prior to OpEx Week
12/10/10… S&P ???
09/10/10… S&P +1.0% two sessions later
07/09/10… S&P +1.6% two sessions later
01/08/10… S&P +0.1% three sessions later
12/11/09… S&P +0.1% two sessions later
10/09/09… S&P +0.2% two sessions later
03/13/09… S&P +2.9% two sessions later
09/12/08… S&P +0.3% five sessions later
09/14/07… S&P +2.4% two sessions later
07/13/07… S&P +0.0% four sessions later
11/11/05… S&P +0.7% four sessions later
08/08/03… S&P +1.3% two sessions later
03/14/03… S&P +4.0% two sessions later
08/09/02… S&P +1.2% three sessions later
07/14/00… S&P +0.0% one session later
11/12/99… S&P +1.7% two sessions later
04/09/99… S&P +0.1% two sessions later
06/13/97… S&P +0.1% two sessions later
11/08/96… S&P +0.0% three sessions later
09/13/96… S&P +0.4% two sessions later
05/10/96… S&P +2.1% two sessions later
02/09/96… S&P +0.6% two sessions later
10/13/95… S&P +0.4% two sessions later
09/08/95… S&P +0.7% two sessions later
05/12/95… S&P +0.5% two sessions later
03/10/95… S&P +0.7% two sessions later
07/10/92… S&P +0.7% two sessions later
07/13/90… S&P +0.1% two sessions later
05/11/90… S&P +0.7% two sessions later
07/14/89… S&P +1.2% three sessions later
05/12/89… S&P +0.5% two sessions later

Two noteworthy points from the table above…

The S&P closed higher (above the setup day’s close) at some point during expiration week 100% of the time.

The S&P closed higher 2-4 days later in 28 out of the last 30 occurrences, or 93% of the time, significantly above the 70% random chance for a higher S&P 2-4 sessions later in the same time frame.

This tells us that we’ll most likely see a close higher than Friday in the Tuesday-Thursday time frame. We also have positive indications for Monday given S&P futures’ back-to-back opens above the previous day’s high. Recently highlighted negative divergences such as those seen on charts of SPX cumulative breadth and percentage of SPX stocks over their 50-day average have either been nullified or look a lot less negative after the last couple of sessions. That will be even more true by mid-week if the market sticks to seasonal tendencies.

Categories : Archived EOD Commentary, End-of-Day Commentary

 Print This Post