Bearish seasonal tendencies ahead

September 15, 2006 · Print This Article

As I have mentioned several times this week, the week following options expiration tends to be quite bearish. After the nice rally this week I would expect to see the bears move back in and move the market lower over the next few trading sessions. How sharp the move lower (if at all) should be very telling where the market is headed over the next few weeks.

Oftentimes, sharp moves during expiration week can be deceiving. Will this past week’s move fall into that category? Not sure. But, I can tell you that the technical picture is pointing towards a short-term move lower. The Nasdaq 100 and Dow are now in a “very overbought” state, just another feather in the bears cap going into next week. When the indices reach this type of level the probability for a short-term contrarian move start to look very good. Have a great weekend!

RSI (5) for September 15, 2006