Seasonal Weakness Ahead

A stated a few weeks ago as the market was tumbling that we were “very oversold” and a bounce was imminent. This was not a big surprise and most traders, while tentative, were predicting the same outcome. Now many market participants seem befuddled by the next move. Was the recent rally a last ditch effort before the “real” bottom occurs, or did last Wednesday’s trading mark the bottom? 

As I have mentioned  several times over the past month (also in the last Options Expiration report) that the period following June Options Expiration is historically, seasonally weak. Couple this information with the bearish phenomenon that occurs the day following options expiration and we could possibly be back at the recent lows in the short-term. Institutions are still showing heavy net short positions and you have to wonder how much of the move on Thursday was fueled by the big boys covering their positions. This certainly seemed to be the case in the options arena. I just don’t think the Bears are going to give up that easily.

Daily Articles of Interest

• seems to have a similar view to my market commentary today

• “does not mean that much”

• Have Hardly Budged

 RSI Wilder (5) for June 16, 2006

• SPY 45.7 (neutral)
• DIA – 57.1 (neutral)
• QQQQ – 52.7 (neutral)
• IWM – 46.3 (neutral)