Option Investor
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Be alert into the close!

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In a conversation with John Seckinger this afternoon, I was just looking at our "pivot" matrix as John was wondering to himself what next months strike levels of importance might be.

I blurted out, "Oh, just use the pivot matrix and look at the monthly numbers, using S2, S1, P, R1 and R2." Then.... I myself studied the matrix a little closer and the PIVOT for the monthly was 901 for the SPX. "Wait a darned minute" I thought to myself. Where's the SPX trading right now? 900.

Oh my! I thought. Then to make things "worse" I noted that this week's S2 was 898. Hmmmm... pretty close to 900 and could have made sense as a closing level with this morning's lower open.

Then I made things even worse, and used our "5-minute opening bar" retracement. Check this out.

S&P 500 Index Chart - 5-minute interval

Holy cow! The technique of "5-minute opening bar" has my 61.8% retracement at 900.96. This is too weird.

I'm also looking at the SPX open interest for March, and find heaviest open interest at the 925 and 900. Yesterday's close was pretty darned close to "max pain" on the 914 close, but overnight earnings from MSFT and IBM certainly changed that.

While traders may well see a 900 close in the SPX, stay alert! I really doubt that 912.50 could come back into play, but you just never know and some contracts may be rolled into February or March that could drive price action.

At the same time, traders that are perhaps trading short-term in the SPY, DIA or QQQ, may be wasting their time right now as the indexes may have indeed found their daily action and now simply look to be pegged at current levels.

I get a lot of questions from short-term option traders regarding "where do you think the SPX will close at expiration." We can never know for sure, but the observation made above is very interesting and may be of use in future months!

Jeff Bailey

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