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Commentary: Paul Ebeling on Wall Street




“Overall the sentiment has turned negative meaning a Key reversal is coming soon” –Paul Ebeling

Last week the Quarterly Expiration began

Friday, futures opening within Thursday’s range after an uneventful overnight session.  It was a Quarterly Expiration day, so “big money” took control around Key strike prices, especially those with high open interest.

The S&P sat within 1% above its rising 50-Day SMA, which all eyes looked to se if this Key support indicator would break, it did. 

Markets in general have been under some light distribution phase that began after the Labor Day Weekend.  Friday, was a Quarterly Expiration, so perhaps buyers are likely to re-enter the market by early next week.  At the very least, expect volatility and liquidity to increase as portfolios make necessary adjustments.

The DJIA has been the laggard index since late-August and is the 1st to drop below its 50-Day MA. 

And, while peer Large Caps are still well positioned above their up-trending 50-Day MAs, it is prudent to note that a shift in upward momentum appears to be underway. 

The Small and Mid-Caps indices did what I warned about, which is pulling back to aggressively to create a “false breakout” from their late-August strength. 

This is another “red flag” that warrants taking more caution if trying to buy every dip.  These distribution days and rolling over below Key technical support zones must to be respected.

Semiconductors have been holding up much better than most other areas in the market, and the Energy complex has recently seen renewed life with Crude Oil breaking out over $70-barrel.

Bottom line is sector rotations have been a dominant theme throughout this yr, so that continues to be a Key focus for traders to capitalize on momentum. 

Recent distribution activity warrants a more cautiously Bullish approach especially as big money will be making lots of adjustments into this week.

Our hard and fast rule: no trading 3 days before and after option expiry. Pay attention, it is your money so your responcsibliity.

Have a prosperous week, Keep the Faith!

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Paul A. Ebeling, a polymath, excels, in diverse fields of knowledge Including Pattern Recognition Analysis in Equities, Commodities and Foreign Exchange, and he is the author of "The Red Roadmaster's Technical Report on the US Major Market Indices, a highly regarded, weekly financial market commentary. He is a philosopher, issuing insights on a wide range of subjects to over a million cohorts. An international audience of opinion makers, business leaders, and global organizations recognize Ebeling as an expert.