Squawk Morning Briefing: News During Expiration

Expiration week has a way of exaggerating moves.   If positions which looked like they might expire worthless suddenly have value then it can drive prices either up or down depending on which side is closing positions.

The last month has been mostly sideways in a wide range.   Options speculators who may have been looking for a bearish breakdown or a bullish reversal over the past month may be stuck holding positions which never reached their targets and we can continue seeing dramatic reversals as prices oscillate within the last month’s range.

That means that news events can see dramatic reactions which might otherwise be disproportionate.   The market made a significant move on headlines that the Austrian parliament rejected the EFSF.   It turned out to only be a preliminary vote and not so significant.

In addition to any unscheduled news out of Europe, today we’re expecting a number of scheduled economic reports.   Weekly U. S. jobless claims are already in and show a jobs picture weaker than expected.  Likewise, the Empire State manufacturing server came in showing significant regional manufacturing slowdown.   Weekly Industrial production at 9:15 EDT and the Philly Fed numbers at 10:00 EDT will have their chance to chime in on manufacturing, but while the picture looks bleak, we need to keep in mind that options expiration can amplify moves and then amplify sharp corrective reactions.

So we have to be particularly careful over the next two trading sessions even though our focus remains downward.   Full details are in today’s videos.

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