Triple Witching Friday

Triple Witching Friday

September 15, 2023

Key Takeaway

Today - Friday, September 15th falls on a day known as "triple witching". The term, admittedly a little scary in nature, is known for describing an event which happens four times per calendar year where huge amounts of derivative contracts that are tied to stocks, index options and futures contracts all mature simultaneously. In addition, this coincides with the rebalancing of many major indexes, including the S&P 500, which could further increase volatility, as more shares tend to exchange hands. All of this is occurring during a month in which the S&P 500 and major indexes tend to struggle. So, I think the near-term volatility risk is elevated. That being said, a report from Goldman Sachs illustrated that investors by and large have favored cash and fixed income thus far this year - ultimately missing the majority of the market's remarkable recovery. In fact, fund flows into money market funds and bonds have dwarfed those of stocks year to date. There is, however, a wide belief that a possible stock market rise into Q4 could cause a rotation back into stocks for investors, which could be a good recipe for a strong finish. So we'll continue to keep our shopping list current for when stocks go on sale.

As you can see below, the S&P 500 is really just meandering. Volatility levels as of late have dropped to year-long lows. Is this the calm before the storm? As it stands, the index is simply range bound and winding up a bit (lower highs and higher lows). RSI is positive but bumping around the 50 range (we want this to remain above 50), MACD is right on the zero line (we want to see this stay above zero) and price is below the 50 day moving average but above the 20-Day moving average.  The green arrows are the support levels we're watching.

 

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