Triple Witching Hangover

This week is turning out to be a classic post quarterly options expiration week.  The artificial buying pressure late last week after FOMC has been taken back plus more as the fund managers' puts expired out of the money.  It is going to take a few more days of nervous trading for the investors to get back to their normal level of put protection.

Also, it has been 1 month since the triple bottom around 2825 was hit on August 26, so the tailwind from fund managers getting back to their normal level of equity exposure is gone.  It doesn't mean the uptrend is over, but the probabilities are more even for up or down price movement.  We are in a chop zone and it favors the counter trend traders for the next 2-3 weeks.  After that, we'll probably go back to trending higher if the bond market cooperates and doesn't selloff too much.  Anything under 1.90% 10 year is enough to provide support for equities for the remainder of the year, as the fundamentals aren't bad enough to cause a sustained equities selloff with interest rates this low.   

The impeachment news is a distraction, as everyone realizes that Trump will not get impeached with a Republican majority in the Senate.  The House can call for impeachment, but the Senate will decide not to do it.  The impeachment has no impact on the US China trade deal, the Chinese were never going to give what the White House wanted, and some agriculture and pork/beef purchases won't be enough to get Trump to roll back the tariffs.  Its probably enough to keep tariffs where they are and avoid further escalation.  It seems both sides would rather just kick the can and keep things where they are, instead of giving in to the other side. 

Neither the long side or the short side excites me here.  If I had to put on a trade, I would reluctantly be a buyer of SPX around 2950-2960 support, and be a seller around 3010-3020 resistance.  The positive for the market is the low expectations for a US China trade deal, so there won't be much disappointment if nothing major happens.  The negative for the market is long term weakening earnings growth and overvaluation.