The 2 P.M. Op-Ex Pin Expiration / Week Ahead

Typically by about 2 p.m. we see the market do as it pleases, often randomly as the options expiration pin is released, having caused the largest dollar amount of options to expire worthless giving Wall Street easy profits as a majority of options will expire worthless which is why I have adopted a different strategy with options that is essentially the opposite of everything that is appealing about options as they were created by Wall St. just like the state's create the lotto, they know what appeals to people and like Las Vegas, they know the odds are on their side. So while I won't get in to the whole thing right now, I have tuned my profitability on options around, rather than taking large losses as I played options the way they appeal to us (buy cheap, but a lot, buy short expirations so you can buy cheap and a lot and hold them too long trying to score a triple digit gain). Rather I try to buy in the money, quality options with lots of time, more than I think I'll need and I never buy them chasing an asset, but only when they move in the opposite direction of my intended plan so I get them at a steep discount and sell them at the first sign of a pullback or consolidation to avoid losses through time decay. I also use options as a tool for specific trades and circumstances rather than a trading system, but that's another post.

We are near the end of the Friday op-ecx pin which we have typically seen end around 2 pm as most contracts are closed out by then.

Now the market is free to move a bit more and we get some of the best 3C data of the week the last 2 hours of today.

Here's what the intraday averages look like, remember what I expect very short term (pullback)...Therefore, the signals we see right now could either work in to the close, but I'd still expect some more work to be done on a short term bounce base that we have been looking at in to Monday or these signals could just pick up in to Monday Either way, I think the charts below should give you a good idea of what to expect next week broadly speaking. If I need to make any changes or updates to the forecast, I will.

 QQQ 1 min with a VERY narrow range today, typical of an options expiration maximum pain pin level. However note the 3C negative divegrence intraday today suggesting a drop in to the close or in to early next week/Monday morning likely as the white arrow is about where I'd expect price to move to in order to have a base that can support even a 1-2 day bounce.

More important than any bounce we can sell in to is RISING VOLATILITY, that is what we see between stage transitions and even though we've already transitioned to stage 4 decline, as I have shown in 3 examples this week, even in stage 4 it's not until volatility picks up do we see the sharp downside moves that stick.

 Confirmation on QQQ 2 min with a positive at yesterday's base low and a negative in to today as we need to touch the area of that low one more time.

QQQ 3 min negative divergence today is even more confirmation, keep in mind all short term intraday charts.

 As for the bounce, QQQ 5 min with distribution at stage 3 top which forced price in to stage 4 decline or the start of it and the base accumulation area for the bounce I'm looking for, more importantly the increase in volatility whether up, down or sideways.


 IWM 1 min going negative intraday today

 IWM 2 min with the suspected base lows from yesterday (white) and a negative divegrence short term in to today for the move down expected to finish the base.


 3 min IWM leading negative divegrence today, again whether we move down in to the close or Monday morning, it looks like that's where we are going as suspected yesterday. Remember we expected today to be a dull day because of the op-ex pin.


IWM 5 min bounce chart/divegrence, although I don't think the base is done, the chart that needs to be positive for any bounce more than intraday, is.

Now a broader look at the week ahead using SPY.

We have the positive in to yesterday's lows, likely the base area and a negative in to today's tight op-ex pin.

SPY 3 min also negative as well as a larger negative at the stage 3 top of the last bounce sending prices lower.

This 10 min chart shows the F_O_M_C knee jerk move, the distribution in to it we expected and the complete retrace of the entire knee jerk move as I always warn, "Beware the F_E_D knee jerk move, 80% of the time it is wrong".

To the far right a positive for a bounce, but no where near as large as the negative on the chart.

As far as what happens after a bounce early next week which I want to use to short in to or open puts as the bounce looks to end...

Remember the early 2015 range and my warning that we will have to see a head fake move allowing smart money to sell in to retail buying on a breakout above the obvious range before we can move any lower. That range and head fake move have occurred, the distribution in to the move which we expected is now on the chart, thus any bounce on short term charts is a gift to use to sell or short in to.

We have a horrible leading negative divegrence and this is no 3 min chart, it's a 30 min so I expect as the bounce ends next week, we see another sharp move lower like this week, except this is the real volatility move that sticks if you remember the 3 examples of similar situations in the recent past.

I do believe we will make a new low for 2015 and we will challenge the October lows and we will, maybe not next week, but soon, break to a new low for the entire trend since 2009, below the October lows.

That's the game plan.