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Friday, August 21, 2009

Options Expiration Friday

August 21st is options expiration, where the hardest games are played. Frankly, this market refuses to die, and I can't hold my positions much longer. I already lightened up as previously blogged a week ago.

But I am holding out hope, just a little bit longer until Tuesday, to see if the options expiration games surprise to the downside.

In any event, aside from "vodoo" of options expiration, that is going on here is a battle of many stock market indicators, but the primary three that seem to be a focus. (John Chinnock & bloggers)

1) BKX - The Banking Index, it seems as long as this index levitates defying reality, so will the market
2) TNX - As long as interest rates are kept under control, the US government can continue to print debt to subsidize the private sector
3) USD - As long as the USD currency weakens, the market rallies as "cheap money" enters into the market. Long term, if USD weakens substantially, it is HORRIBLE for the US citizens and the economy. Commodities will start to rise, companies expenses rise, and people's daily expenses rise (as discussed in china vs usa post)

The SPX and overallmarket trends seem to be focused on these three basic factors. If the market focused on reality of business, it would be much, much lower. But as long as paper shuffling by US Gov makes it clear it will spend unlimited cash to hold up the banks, and the world continues to supply the US with unlimited credit, the market will remain afloat.

At this point, god help us all if the world say "enough" of debt spending and interest rates rise OR a major bank fails (like citibank) then BKX will tank quickly.

Also, for everyone who reads this blog who is starting to think I am completely wrong, that the market rally proves we are in a new bull market, think back to October 2007 when DOW was over 14,000, was the market right?

Two charts I am focused on, the SPX and the USD, see below.
From WebSurfinMurf's Financial Blog

From WebSurfinMurf's Financial Blog

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