I feel like I’m stuck in a time warp. Last June during expiration week I said: “Aren’t these expiration weeks fun? The market thrashed around today and basically went nowhere.” That definitely holds true this year as well, especially for the S&P and Dow, and is why I adopted my do little or nothing during expiration weeks rule.
Yesterday the NASDAQ was able to bounce back up into that symmetrical triangle it’s been threatening to break through. If any of you have any doubt about how many people use technical analysis, or how much of a self-fulfilling prophecy it can be, yesterday’s action should allay some of those doubts. Buyers stepped in right on cue as the NASDAQ’s 50-day moving average was touched and pushed the index back above the bottom of the triangle. It was a textbook spring.
Having said that, we’re set to gap down out of the triangle this morning. The QQQ is trading right at yesterday’s low, which would put the NASDAQ real close to its 50-day moving average. I won’t be surprised to see traders try to close the gap before we find our real direction. And given that it’s expiration today we may just flat line.
Alan Farley has posted an article on morning gaps (you might want to save that locally because he doesn’t provide archives). As you’ll see I’m not the only one who gets driven crazy by gaps.
