Babbling on Markets Direction Up? Down? Maybe Cash!

Where do we go from here.  It is difficult to argue with the below strength in the charts all of which look bullish, but I have heard people calling for a pull back for the last 100 points 75 points 50 points 25 points and even today.  And they may be right, who knows, but for me as long as the 10 day, 20 day & up trend support are holding I will remain net bullish.  Being option expiration I decided to take a somewhat random sample to see if there was any clear trend within it and what happens to the markets afterwards.

My sample size was 20 out of the past 36 months.

What I found was this, 13 out of the 20 weeks following monthly option expiration the market moved higher.  7 out of 20 moved lower.

On the higher moves 5 out of the 13 were higher less than 1%, 1 one of the weeks was higher between 1%-2%, 5 of them were higher 2%-3%, 1 of the weeks was higher between 3%-4% & 1 week was higher between 4%-5%.

On the lower moves 3 out of the 7 were lower less than 1%, 1 one of the weeks was lower between 1%-2%, 2 of them were lower 2%-3% & 1 of the weeks was lower between 3%-4%.

A bullish trend 65% of the time based on this sample, which by the way does include different market environments.  Interestingly, over 50% of the higher moves was more than 2%, while over 50% of the lower moves was below 2%.

 Next I decided to look at three years of the VIX overlapped with the SPY.  I do believe extreme highs in the VIX mark lows and extreme lows in the VIX mark highs, temporary, of course.  But, these need confirmation and it is easy to say oh the VIX is at 13.5 top is in.  Same as a stock printing a hammer and you take a position without confirmation it does not make sense.  We have been at lows in VIX for the better part of the past six months, levels, not seen since 2007 so does this mean the top is in?  I looked over the past three years at instances of the VIX between 13-15 and what occured the following week.  The VIX will rise come March if not before hand when debt ceiling headlines take over the news and we begin a news driven market such as the fiscal cliff.

What I found is the VIX is up the following week 7 out of 9 times, unch 1 out of 9 times & lower 1 out of 9 times.

Of the 7 times the VIX was up the next week 6 out of 7 the market was down as well.

The one week where the VIX was up but the market was not down we went from about 138-139 on the SPY to a peak of 146.29 before correcting to the 50 day and resuming the rally.

The week where the VIX closed flat the following week saw the market up the next week and down the following week.

The one time the VIX was lower the following week saw the market up that week and the following week.

Well nothing clear here, but that's expected as the market is never that simple.  With that being said, bulls should look for OPEX following week in their favor and look to see an unchanged or lower VIX, while the bears will look for that spike in the VIX and hope its not the 1 out of 6 chance that the market maintained its bullish momentum.  Overall probably best for both sides to remain tactical, scalping, book gains and remaining over night net cash.  Good Luck!!!


Being that AAPL is the most loved and hated stock in the universe, I took a look at the last 13 months of OPEX and what AAPL did the following week.  The results are it was higher 9 out of the 13 weeks following OPEX.