David White

Does Options Expiration Week Equal Stock Market Strength?

Good article. I am a little reassured that the market wants to go up. From the charts the SPY seems inclined to go up. the distance has been narrowing between the 20 day ema and the 50 day ema. The 20 day ema is still significantly below the 50 day ema, but it is noticeably edging closer. A cross would be very much a near term bulish sign. It is beginning to look like that may happen.

On the negative side the possible US car industry failure is still a huge worry. Failure to resolve this issue positively could have a huge negative impact on the economy and on the equities markets. Literally more that 1,000,000 jobs could be lost in one fell swoop. Then too you have to consider the CDS implications. If any of these companies fails (worse if more than one fails), it could start a huge downhill snowball of CDS redemptions. This could virtually kill the financial industry. This area clearly needs to be more effectively regulated. Also the loans to emerging economies are a threat to start a CDS snowball. These economies are virtually all dependent on exporting their goods. That part of their business has been hurt dramatically in the current recession. Further for obvious reasons these same countries are having a very difficult time getting further credit to see them through this time. Without it, they are in very dire straits indeed. This just means that the threat of a CDS snowball still looms large for the financial industry. I think JP Morgan was complaining about this the other day, when the CEO mentioned the Bear Stearns counter party risk problems they had acquired along with Bear Stearns. This makes me very unsure how long the current rally can last. I think a prudent strategy would be not to bet to heavily in any direction.