OPEX Friday. Just 50 trading days left.

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Our View

Well… there isn’t much that hasn’t been said already. Today is the monthly October options expiration. Yes, October! There are only 50 trading days left in the year 2024, and just 12 sessions left until the presidential election, bringing a surge in headline news and volatility. Right now, the ES and NQ have been grinding higher, with the ES marking its 47th new high for the year. Are the markets overextended? Yes. Does it matter? No, and for the same reasons—endless stimulus and the upcoming election.

9 Sessions left in October
20 Sessions in November
12 Sessions to the election
21 Sessions in December
50 Sessions left in 2024

MiM and Daily Recap

The ES traded down to 5871.25 and rallied up to 5927.25 during the Globex session. Thursday’s regular session began around 5923. After the open, the ES hit a low of 5825.00, then dropped 29.5 points down to 5895.50 by 9:37 AM. It then rallied 17 points to a lower high at 5912.50 before dropping 21.5 points to 5891.25. Another rally took the ES to a lower high at 5907.25 at 10:25 AM, but it dropped again to 5886.50 at 11:00 AM. After that low, the ES rallied 27 points up to 5913.50, sold off 13 points down to 5900.50, and rallied 10 points to 5910.50 at 1:09 PM.

After a pullback to 5904.00, the ES climbed 6 points to 5910.00 at 1:51 PM, but then dropped sharply (Algo Bomb) by 22.75 points to 5887.25 at 2:39 PM. It then rallied 9.75 points to 5897.00 before selling off down to 5886.00 at 3:43 PM. The ES traded up to 5890.00 at 3:49 PM and then down to 5884.75 by 3:55 PM before closing at 5886.50 on the 4:00 PM cash close. After 4:00 PM, it traded up to 5892.25 at 4:09 PM and then sold off to 5877.50 at 4:33 PM, settling at 5878.50, up 3.75 points or +0.06%. The NQ settled at 20383.50, up 55 points or +0.27% on the day.

In the end, the large pre-open rally exhausted much of the day’s buying power, and the MIM’s $2.3 billion for sale contributed to the late-day weakness. The ES’s overall tone felt tired, and volume remained on the low side at 1.16 million contracts traded.

Technical Edge

Fair Values for Oct-18-2024 are as follows, SP: 43.31 NQ: 165.14 Dow: 261.58

Daily:

Weekly:

Guest Post:

SpotGamma – OPEX Trace

Trace also shows the estimated impact of OPEX for SPX, by adjusting the heatmap for the removal of expiring options. This creates a “ripple” in the map at 9:30AM ET, when the bulk of SPX Oct OPEX positions expire (SPX AM). That is then followed by a second expiration for SPX, and all other stocks, at 4PM. In this case the map is inferring that things should remain stable for today, following the AM Exp.

If we look at gamma through a standard GEX curve, you can see that following todays expiration (orange curve), gamma will remain positive down through ~5,750. This ties in with the light blue color remaining in the Trace map to the right of 4pm ET expiration. The takeaway from this is that if there is a drawdown, we would initially not expect a move much lower than 5,750. We invoke “initially” because that estimate is based on current positioning, and we can’t help but feel traders do not want to be net short of puts/vol into the election.

However, the election is still 2-3 weeks away, which is a lifetime for 0DTE traders. On this point, if you want to hedge the election event itself, why carry that protection until closer to the event? Those who put on election protection have likely had some very negative carry!

Checkout more of SpotGamma products

Jeff Hersch – @AlmanacTrader

New All-Time S&P 500 Highs – No Need to Fear Until They Cease

S&P 500 has recorded 46 new all-time closing highs as of the market’s close on October 16, 2024. All of these new all-time highs have accompanied a solid 22.5% S&P 500 gain thus far. Since 1950, S&P 500 has recorded 1370 new all-time closing highs in nearly 75 years, which averages out to 18.3 new all-time highs per year. This makes 2024 an above average year and there is still over two months of trading remaining.

In the table above, yearly S&P 500 performance has been split into three separate categories, Above Average (more than 18), Below Average (1 to 18), and No New Highs based on the frequency of new all-time highs logged in each year. Each category has the year, the number of new all-time highs, the year’s performance and the following year’s performance.

Years with an above average number of new all-time highs, outperformed by a wide margin. Only 2018 was negative. Average S&P 500 full-year gain was a solid 20.7%. Years with a below average number of new all-times, were mixed and produced the smallest average gain. Years with no new all-time highs were slightly better based upon an average gain of 3.0% and more advancing years, but also had frequent double-digit losses.

Looking at the Next Year % performance when S&P 500 stops hitting new all-time highs is where some concern begins to trickle in. S&P 500 performance in the Next Year after an Above Average Year has not been all that great. Average performance dives to just 5.9% and only 63% of the Next Years were positive. The next time you hear someone getting nervous about S&P 500 new all-time highs frequently occurring, their concern is not entirely unwarranted.

PTG Trading Room Summary for October 17, 2024

On October 16, 2024, the PTG trading room engaged in a comprehensive discussion about the market’s momentum, specifically highlighting the overnight and pre-market rally that positioned the market to potentially surpass its all-time high.

Key Highlights:

As the day progressed, sentiment shifted with the market facing challenges at key levels, including a significant sell imbalance noted at market close

IMPRO Trading Room Summary for October 17, 2024

On October 17, the trading room focused on navigating market fluctuations, driven by significant economic data releases and corporate earnings. Traders were highly active, employing various strategies such as buying the dips and attempting to capitalize on market volatility.

Key Highlights:

Traders utilized both technical and sentiment-based approaches to maximize profitability in an otherwise choppy trading environment. Despite challenges, a few managed to successfully capture gains by focusing on key pivot levels and volume patterns.

NQ

Nasdaq continues to not make that higher high

Economic Calendar

Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.

Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!