Alternatives to Sex During a Recession

Gio Fri Dec 19, 2008 6:06am EST 1 Comment

This is in response to WoodShedder’s post. His last title to his post completely captured my attention. How dare him! Well, since sex sells, I decided to take the same approach and use “sex” in my title to draw more readers. Looks like it worked because you are reading this. Fine. Answer this poll so Woodshedder can tell us if we should short MCD or get long PLA (pun not intended. I promise!):

Tomorrow, expect nonsense. I really don’t like trading during options expiration days. Since so many have asked me what will happen on quadruple witching day, I decided to dig up our last one on September 19th, and a few others. Pay attention to price and volume.

As you can see, volume really did spike in anticipation of quadruple witching for September. Actually, some crazy stuff was going on there. The market dropped -400 points, then rallied almost 800 points until quadruple witching day all in the week… Look at the tape action from the 16th-22th strange space alien action! However, this really did set up for one bearish October! …

PRICES

Date	Open	High	Low	Close	Volume	Adj Close*
30-Sep-08	10,371.58	10,922.03	10,371.58	10,850.66	6,065,000,000	10,850.66
29-Sep-08	11,139.62	11,139.62	10,266.76	10,365.45	7,305,060,000	10,365.45
26-Sep-08	11,019.04	11,218.48	10,781.37	11,143.13	5,383,610,000	11,143.13
25-Sep-08	10,827.17	11,206.05	10,799.77	11,022.06	5,877,640,000	11,022.06
24-Sep-08	10,850.02	11,041.02	10,696.38	10,825.17	4,820,360,000	10,825.17
23-Sep-08	11,015.69	11,214.65	10,763.77	10,854.17	5,185,730,000	10,854.17
22-Sep-08	11,394.42	11,450.81	10,956.43	11,015.69	5,368,130,000	11,015.69
19-Sep-08	11,027.51	11,415.48	11,027.51	11,388.44	9,387,169,600	11,388.44
18-Sep-08	10,609.01	11,149.07	10,403.75	11,019.69	10,082,689,600	11,019.69
17-Sep-08	11,056.58	11,068.87	10,521.81	10,609.66	9,431,870,400	10,609.66
16-Sep-08	10,905.62	11,193.12	10,604.70	11,059.02	9,459,830,400	11,059.02
15-Sep-08	11,416.37	11,416.37	10,849.85	10,917.51	8,279,510,400	10,917.51
12-Sep-08	11,429.32	11,532.72	11,191.08	11,421.99	6,273,260,000	11,421.99
11-Sep-08	11,264.44	11,461.15	11,018.72	11,433.71	6,869,249,600	11,433.71
10-Sep-08	11,233.91	11,453.50	11,135.64	11,268.92	6,543,440,000	11,268.92

And here’s the price action of quadruple witching for March (nothing significant happened on June’s quadruple witching). This one had bullish action going on the tape. Anticipation of quadruple witching moved the market up about 500 points, which ignited a long Sisyphean rally all the way to May. Notice, however the massive volume drop on the 19th, then a huge influx of volume returning on quadruple witching…

PRICES

Date	Open	High	Low	Close	Volume	Adj Close*
28-Mar-08	12,303.92	12,441.67	12,164.22	12,216.40	3,686,980,000	12,216.40
27-Mar-08	12,421.88	12,528.13	12,264.76	12,302.46	4,037,930,000	12,302.46
26-Mar-08	12,531.79	12,531.79	12,309.62	12,422.86	4,055,670,000	12,422.86
25-Mar-08	12,547.34	12,639.82	12,397.62	12,532.60	4,145,120,000	12,532.60
24-Mar-08	12,361.97	12,687.61	12,346.17	12,548.64	4,499,000,000	12,548.64
20-Mar-08	12,102.43	12,434.34	12,024.68	12,361.32	6,145,220,000	12,361.32
19-Mar-08	12,391.52	12,525.19	12,077.27	12,099.66	1,203,830,000	12,099.66
18-Mar-08	11,975.92	12,411.63	11,975.92	12,392.66	5,335,630,000	12,392.66
17-Mar-08	11,946.45	12,119.69	11,650.44	11,972.25	5,683,010,000	11,972.25
14-Mar-08	12,146.39	12,249.86	11,781.43	11,951.09	5,153,780,000	11,951.09
13-Mar-08	12,096.49	12,242.29	11,832.88	12,145.74	5,073,360,000	12,145.74
12-Mar-08	12,148.61	12,360.58	12,037.79	12,110.24	4,414,280,000	12,110.24
11-Mar-08	11,741.33	12,205.98	11,741.33	12,156.81	5,109,080,000	12,156.81
10-Mar-08	11,893.04	11,993.75	11,691.47	11,740.15	4,261,240,000	11,740.15

Now here is how we are looking heading into December‘s quadruple witching…

PRICES

Date	Open	High	Low	Close	Volume	Adj Close*
18-Dec-08	8,823.94	8,946.36	8,516.02	8,604.99	5,675,000,000	8,604.99
17-Dec-08	8,921.91	9,001.96	8,701.13	8,824.34	5,907,380,000	8,824.34
16-Dec-08	8,565.65	8,985.63	8,534.03	8,924.14	6,009,780,000	8,924.14
15-Dec-08	8,628.81	8,738.40	8,431.04	8,564.53	4,982,390,000	8,564.53
12-Dec-08	8,563.10	8,705.43	8,272.22	8,629.68	5,959,590,000	8,629.68
11-Dec-08	8,750.13	8,861.86	8,480.18	8,565.09	5,513,840,000	8,565.09
10-Dec-08	8,693.00	8,942.46	8,589.86	8,761.42	5,942,130,000	8,761.42

Looks like most of the space alien magic occurred before the Fed rate cut, then after. We actually dropped on lower volume yesterday, so if history repeats, then we should have an up day tomorrow… but you know me by now, I believe there’s too many variables out there for history to repeat itself… we only highlight the histories that happen to repeat itself.

So basically, what will happen tomorrow… flip a quarter. Just know, the next time we get options expiration week, try to exit as many swing positions as you can. I’m sure a lot of people got whipsawed this past week, and many of them are great traders, doing everything right, except these special weeks don’t care about what’s “right.” (For a day trade I only have 3 setups. One of them is to short SRS in an event the market moves higher. End that party.)

Well, hope that sheds a little more light, or maybe it’s blocking the light. Whatever.

As we turn into the final week of December, I hope to “re-set” my Vix charts. In other words, I’m throwing out all previous “short the market points” and “buy the market points”, simply because fear and greed are dynamic. I’ll let you know later. I always start of with a number of combinations, then throw some out as time goes on. For now, it looks like the Vix is drifting, searching for another channel to chill inside. That means we’ll probably be range-bound in the markets for longer than we think. It might get boring for a while. Until the Vix comes back to full force and we get a trend that actually doesn’t screw up on volume, keep your positions light and don’t be afraid to take a profit. We’re range-bound! You’ll have plenty opportunities to re-enter. But please, enough of this market down -200 points Vix down -2% nonsense!

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Finally, on Thursday, I put in this day-trade. Notice the short-covering that moved DRYS up, that led to synchronized selling with the overall market when Vix bounced off 44.xx. That was a great place to short (I shorted a number of other retail stocks, long iETFs, but exited about half at the close)!