Monday, September 22, 2014
Texting BABA IPO News on New IPhone During Quad-Witching
It’s hard to imagine all that happened on Friday wouldn’t usher in some market reaction. To clarify the cryptic headline above though not in order of importance, Alibaba (BABA) had its IPO bringing in $230b, Apple released its new iPhone 6 – selling 10m over the weekend, with this all happening during a Quadruple Witching (where market index futures, market index options, stock options and stock futures all expire).
There was no extreme market movement on Friday despite all that took place. The S&P 500 Index made a new record high, but closed lower, unable to hold the hype of the BABA IPO. The VIX opened lower but finished higher, holding an important support at a ‘bullish window’ opened in late-August.
Currently, equity prices are lower giving an ominous look to Friday’s ‘high wave’ session with large upper and lower shadows and a decidedly small difference between open and close (‘body’). Friday’s high was 2.3% above the week’s starting Monday low. We would therefore look at a close today below 1995.50 (ESZ4) as rather bearish.
The VIX Index is 1.3 higher (11%) and may be signaling another bout of speculative congestion. The strong hold of post-crisis volatility lows is likely to mean more extreme market movement before the end of the year. Right now, as suggested by the VIX index and technical developments in equities still unfolding, the direction of the next 3% is more likely lower.