Thursday was a valiant session that saw the S&P 500 hold above its 50-day moving average again. But buyers didn’t take the bait beyond Consumer Discretionary, Real Estate, and Technology. 

S&P 500 Index		-0.16%
Communication Services XLC		-0.10%
Consumer Discretionary XLY	+0.46%
Consumer Staples XLP		-0.33%
Energy XLE		-1.13%
Financials XLF		-0.29%
Health Care XLV		-0.26%
Industrials XLI		-0.69%
Materials XLB		-1.08%
Real Estate XLRE	+0.19%
Technology XLK	+0.06%
Utilities XLU		-0.84%

Market Breadth

It doesn’t get any closer than yesterday, which saw mixed market breadth with the most positives for the NASDAQ Composite. But it was nothing to get excited about. Interestingly, there were as many new lows as highs on the NASDAQ. It reflects the risk to stocks if investors walk or are spooked away. We’ll see more of this hit-or-miss stuff during the next earnings season.

Market Breadth	NYSE
Advancing	1,521
Declining	1,772
52 Week High	92
52 Week Low	47
Up Volume	1.59B
Down Volume	2.34B

Chart of the Day

Gold and Silver were slammed, which is intriguing, considering how much inflation is in the global economy. So, I’m not prepared to say they’ve lost all its hedging ability. However, it’s been a rough three months when it should have been a great three months.

Today’s Session: Quadruple Witching

Back in the day, Triple and Quadruple Witching were a big deal, and then it kind of faded as an important market event. But with the rise of stock options trading its relevant again.

What?

• Derivatives Expire

When?

• The third Friday of every March, June, September, and December

Which?

• Market Index Futures
• Options Futures
• Stock Options
• Stock Futures

Reaction

Investors unwind futures and options positions right before those contracts expire, and many go on to repurchase contracts, swelling the number of contracts open at the same time. On June 18^th, $818.0 billion in options were set to expire -and at one-point, a single stock’s open interest edged close to $3.0 trillion. These open options influence the share price of the underlying security.

The S&P 500 has been down in each of the last six Quadruple (Quad) Witching Days. While there have been extenuating circumstances, the frenzy of activity associated with derivatives is clear.

Historical Reaction

According to Seasonax, the market has rallied in during the five-day period prior to Triple Witching in 42 of the last 59 occurrences. Then the market usually has meandered for approximately eight days before taking off higher.

The volatility can be more intense in the final hour of trading, known as the Triple-Witching Hour.

Portfolio Approach

We took profits in an Industrial position in our Hotline Model Portfolio yesterday.

Today’s Session

Futures are lower this morning ahead of the University of Michigan’s preliminary consumer sentiment index for September, which will be released at 10am ET.

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