S&P Target Ahead of Unusual Options Expiration

Traders are always watching closely on expiration day, but this month will be extra special.

   

We’ve said that the indicators didn’t exactly point to the recent rally, but as long as it’s here we’ll continue to profit from it. In this video, we look at some of the factors that could sustain the move up and why the market could make a big move around May 17.

Video Transcript

If I had to make a conservative estimate where the S&P 500 was going – well, I don’t know how conservative this really is – but if I had to make an estimate with the information available to me right now, I would stick with basically with a retracement or an extension level based on the decline from September through November 2012. On the S&P 500, that puts us up about 1675 or so, as I show you on the chart in the video. So, we may see prices up another 40 points on the S&P.

What’s driving this? What’s going on in the market that could be causing that kind of upside potential right now? Breadth has really improved quite a bit. There are a lot of ways to measure breadth but one of the ways you could think about it is: Is the market going up because a few key stocks are going up and everything is going down? That was very much the case in March and April.

Or, is the market going up because a lot of stocks are participating in the rally? That’s been the case recently. That’s one of the reasons that we look at this rally as being very different than the bounce that we had in early April, which was really fragile and very shallow market breadth. That’s one of the things that we’re watching at SlingShot Trader for sure.  We’ve been talking about the impact that the Fed has had with POMO.

In fact, one thing to keep in mind is that May 17 is options expiration for May monthly options, and this is also a really big POMO day for the Fed. These are always tentative plans, but right now they’re planning to pump a lot of money into the market on May 17, so that might be interesting. We’ll have to see how that plays out, but it could continue to rally things through next week. I don’t expect we’ll see a 100% smooth trend, but I wouldn’t be surprised if we got a pretty robust movement going into that as traders get ahead of it.

Profit In May and Don’t Go Away!

John Jagerson, the co-editor of the SlingShot Trader options service and co-founder of LearningMarkets.com, is offering a FREE webinar to help you learn how short term and mini stock-options can be used to take advantage of trading ranges and channels that often emerge in the summer market doldrums. You will also learn how to use proper risk management and position sizing to deal with the ups and downs of trading so that winners outpace any bad trades.

Join John Jagerson Monday, May 20, for a live event designed to help you Profit In May and Don’t Go Away!  


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