Stocks Drop But A Rally May Be Coming After Options Expiration
Michael Kramer | Jun 17, 2022 02:37AM ET
Yesterday was another miserable day for stocks, with the S&P 500 dropping 3.25% and hitting the 3,650 level we discussed earlier in the week. Unless we are about to go on some unforeseen path, I think that level should hold some, and we should get a nice counter trend rally. I don’t think a bottom is in yet, but we are getting there.
That 3,650 level falls right on the main trend line that has defined the shape of the sell-off from the very beginning. Unless we are going into some crash mode and heading to 3,350. I think next week we could see a nice rebound back to around 3,725
Today is quadruple witching, which means we could see a countertrend rally start today or Monday, which can send the S&P 500 and the QQQ higher again—perhaps sending the Qs back to $280.
For the S&P 500, there is a nice big gap that needs to fill up to 3,800, but I would look for the first level of resistance to come around 3,725. Options expiration should free up the markets to trade higher, as market makers have to unwind their hedges and buy back S&P 500 and NASDAQ futures, helping lift stocks.
Advanced Micro Devices (NASDAQ:AMD) fell below support yesterday at around $86, which may be important. It has held on several attempts. But this last attempt proved to be too much.
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I mention AMD because NVIDIA (NASDAQ:NVDA) finds itself on crucial support. It hasn’t broken yet, but if AMD broke support, I imagine that NVDA will too.
Keep an eye on the Biotech XBI ETF. The market is making new lows, and this ETF isn’t. The XBI led the market lower, and if it stops going down, it could be telling us where we are in the cycle of this pullback.
Have a good one
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