Post-Options Expiration Blues???

Will the post-expiration bear rear its ugly head on Monday. Historically, the trading day following options expiration is substantially weaker than normal. Couple this with the S&P (SPY) and DOW (DIA) in a very overbought to overbought state and we could indeed expect to see weakness on Monday.

Another telling sign for short-term weakness on Monday is the struggling high-beta sectors of the Nasdaq 100 (QQQQ) and the Russell (IWM). Both indices have struggled to keep up with the S&P and DOW which usually spells trouble going forward. Overall, I expect to see continued strength, with a overbought selling days mixed in, over the next few weeks. Seasonality is extremely strong during this time of year and should help keep the market afloat. However, as we enter 2007 the market could reverse course and head lower much like we have seen over the last five years. I will go over this intersting statistic in tomorrow’s post. Have a great night!

RSI Wilder (5) for December 14, 2006

• SPY – 82.1 (very overbought)
• DIA – 79.2 (overbought)
• IWM – 59.9 (neutral)
• QQQQ – 64.4 (neutral)

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Kindest regards,

Andrew Crowder

Chief Options Strategist

Crowder Investment Research, LLC