Squawk Morning Briefing: OPEX Wild Cards

Conventional wisdom has it that traders have generally squared their positions toward the end of options expiration week.  While that’s generally true, if unexpected events move the market late in the week then positions everyone had disregarded as about to expire worthless can be in play.  In these cases, the effect of options about to expire can dramatically increase volatility.

Every three months GOOG reports earnings on the Thursday before expiration, right after the cash close.  When the result is a surprise this can turn into quite a wild ride.    Another wild card is China; the emerging economic powerhouse reports on a whole slate of economic figures later tonight and any surprise can move markets.

Our general view is that earnings, options expiration, and economic data tend to move markets in the direction of the wave count and generally serve as catalysts to push things in an anticipated direction.  However, the wave count is unclear at the moment and that presents some challenges.  Any significant move from expiration could create the final push upward before a fall, or a down move could either signal a change in trend or the end of a correction  before that last push up.

Therefore, this expiration cycle we want to do less trading and more watching to see if any significant moves give us a clue to the broader picture.  Of course conventional wisdom could still hold and we have small moves this month.  If so, we’ll remain in a waiting game until the market tips its hand.

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Elliott Squawk delivers thorough market preparation every morning in time to take action during the trading day. By combining up-to-the-minute futures activity with traditional end-of-day analysis from cash indices, you receive analysis based on the latest conditions as the trading day sets to open. Each issue of Elliott Squawk goes beyond traditional Elliott Wave analysis because we recognize that trading Elliott Waves is much more than just looking at the most likely current count. Squawk will prepare traders to assess the market action as it unfolds by answering questions that any Elliott Wave trader should consider:

• What price levels and wave motions would confirm an expected move?
• What price levels would make an alternate scenario more likely?
• What technical indicators should be watched throughout the day to interpret wave action?
• What intermarket movements merit special attention to understand likely price trends?

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From time-to-time when circumstances warrant, Squawk will present analyses of other markets that help interpret wave action in a covered market. For example:

• If S&P 500 and Dow counts are ambiguous and NASDAQ behavior helps identify the likely next move then NASDAQ analysis will be presented.
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Kevin McEwen and David Starr are best known to First Wave chat room participants as Kevy99 and Managematics and by their reputation for their Elliott Wave counts that have predicted market turning points. Kevin has been counting Elliott Waves for 28 years, successfully forecasting market moves in virtually every financial environment. David brings together talents in financial market analysis and software development to his wave counting. He has authored many of the studies used by First Wave Traders as well as a number of proprietary studies to aid in counting waves.

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