Thursday, December 18, 2008

12.18.08 - Small Caps & Financials Outperform

The market is holding its own on this pre-expiration Thursday. Here is a terrific article looking at the upward bias during expiry weeks by MarketSci. Note the relative outperformance of small-caps (IWM) and financials (XLF) today. The dollar (UUP) has also caught a small bid for the first time in a long while.

10:50AM PST - Slight range break-down on the SPY. I'll reiterate that there are several technical indicators now suggesting the possibility of weakness ahead. However, I am just personally uncomfortable being too net short [add: US equities] given the Fed announcement this week and various seasonal patterns, however you feel about those. Certainly other alternatives are to keep it small or hedge long holdings with put options (or even sold calls) with the VIX being "relatively" moderate just now (perhaps militating towards the former).

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