Tomorrow is Quad-Witch/Freaky Friday

The third Friday of March, June, September, and December, is Quad-Witch day. This is when stock index options, stock index futures, individual stock options, and single-stock options, all expire on the same day. On Quad-Witch day, we tend to see a spike in volatility off the back of a roughly 40% increase in volume (on average).

We will see roughly 45% of all S&P options expire in December (18th and 31st), with the bulk expiring tomorrow. Based on the current state of the Put/Call ratio, most of these options are calls. Based on the fact that we're at all-time high's, economic data continues to deteriorate (the best and most timely indicator being jobless claims), Stimulus deal coming any second, vaccines priced in, etc.. I would be on the lookout for major fireworks at power hour tomorrow.

As for today, I suspect we may see the end of the Bearish Harmonic pattern playing out on both the short-term timeframes, and also on a larger scale, shown clearly on the daily and weekly timeframes as well. I'm calling 373 as the top, and then I think it's going to get ugly from there. Let's see what happens next.

I appreciate your time today guys. If you enjoyed the analysis, please hit the Like button and subscribe to our profile. The information and analysis shared in this post is not financial advice. Always conduct your own analysis and research. Cheers, Michael.

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Bearish Harmonic on the daily also peaking:

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Looks like the bears are going for the gap fill around 370.84:

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Solid bounce here off the previous all-time high, and now approaching the new all-time high, once again. Bulls have zero intent on letting off the gas...

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In a not so surprising twist, the Republicans (Sen. Pat Toomey in particular), is calling for an end to the Fed's emergency lending programs by year end, and for this termination to be embedded in the fiscal stimulus bill. Steve Mnuchin recently called for the FED to stop it's municipal and corporate bond buying programs by year end, also. This is not going to go over well for all those zombie corporations that persistently sell bonds to the FED and turn around and buy their own stock. Soon, they'll have to actually sell some product, cut some costs, and show (real) profit growth.

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They're just giving away risk protection these days. It's like risk doesn't exist. I mean, I know the FED removed some of the market, credit, and liquidity risk by expanding the money supply by 40% this year. But, at the end of the day, watching markets achieve all-time high's, on a seemingy daily basis, gives me the same feeling I get when I see a criminal injustice.

If the 99% only knew how incredibly bad expanding the money supply is for their standard of living, they'd never allow it to happen. Henry Ford said it best, "It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."

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Put/Call ratio is in for a shock tomorrow:

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That's all she wrote, folks! Bullish price action all day on the US majors, and new high's on the SPY to be celebrated by the bulls. Tomorrow is Quad-Witch, though, so be on the look out for increased volatility off the back of a massive spike in volume.

I hope you guys had a great day, now it's time to relax, and smoke a jay.
Pour yourself a glass of some fine stuff, then when you start to think about markets again, go revisit that jay, and take another puff. Cheers! Michael.