Friday, December 16, 2022

Morning Note: Non-Fundamental Factors and a Quote to Keep in Mind

In yesterday's video commentary I -- in reference to the abundance of short-dated options being traded of late, and to today's massive expiration -- suggested that factors other than fundamentals, and other than the retail trader may be aware of, can move the market in a big way, in a hurry.

Therefore, today (largest options expiration of the year) may see yet another outsized move in the market... Where it finishes the day, directionally-speaking, of course is yet to be determined... Looking at the pre-market action, it's clear that traders are nervous heading into today's session.

Per Bloomberg this morning:

"An estimated $4 trillion of options may expire in today's quarterly triple witching and worries are mounting the expiration will act as an air pocket."

In case you missed them, two videos -- market and economic updates -- from yesterday sit in your inbox (and are linked here and here). Both worth watching to get a feel for the go-forward overall setup.

Asian struggled overnight, with 12 of the 16 markets we track closing lower.

Europe is as well so far this morning, with 16 of the 19 bourses we follow trading down as I type.

As are US stocks to start the session: Dow down 215 points (0.65%), SP500 down 0.72%, SP500 Equal Weight down 0.92%, Nasdaq 100 down 0.22%, Nasdaq Comp down 0.26%, Russell 2000 down 0.59%.

The VIX sits at 23.93, up 0.44%.

Oil futures are down 2.85%, gold's up 0.39%, silver's down 0.19%, copper futures are up 0.15% and the ag complex (DBA) is down 0.20.

The 10-year treasury is down (yield up) and the dollar is down 0.09%.

Among our 36 core positions (excluding options hedges, cash and short-term bond ETF), 9 -- led by uranium miners, Amazon, Albemarle, communication stocks and gold -- are in the green so far this morning. The losers are being led lower by energy stocks, long-term treasuries, Sweden equities, utilities stocks, and base metals miners.

Worth keeping in mind -- for perspective -- when it comes to investing:

"An abnormal reaction to an abnormal situation is normal behavior."

--Frankl, Viktor E.. Man's Search for Meaning

Have a great day!

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