Stocks May Head Lower Following Options Expiration

10/21/2022

1 minute read

2022.10.21 23:37

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Stocks finished the day lower yesterday, with the dropping by 80 bps. The index rallied initially as the weakened, but the dollar rallied, and a weak 5-year TIP Auction sent rates soaring in the afternoon. That sent stocks into reverse, turning a 1% gain into a loss.

Today is Opex, and all that gamma at 3,700 in the S&P 500 will vanish on the opening. That may result in stocks moving lower from the stronger dollar and higher rates. The rising wedge is broken, and even a 61.8% retracement of the move from last Thursday’s lows sends the index to around 3,600.

SP 500 Futures 1-Hr Chart

10-year

It was just last week, I was on the Charles Payne show, and I was talking about the rising to between 4.25% and 4.5%. Today the 10-yer closed at 4.23%; I still think it has some higher to go, with 4.3% now in reach.

US 10-Yr Yield 1-Hr Chart

TIP ETF

Additionally, the ETF is very close to breaking critical support. Once that support breaks, the TIP could drop to around $102, which would likely take the to a new low.

TIP ETF 2-Hr Chart

Dollar

The index is forming a symmetrical triangle, and usually, these triangles lead to breakouts in the direction of the prior trend, which in this case is higher.

USD Index 2-Hr Chart

Tesla

Tesla (NASDAQ:) fell yesterday to support around $207, which is where it stopped. That is the critical level, and should it give way, there is nothing to stop the TIP from falling to around $180.

Tesla Daily Chart

Shopify

Shopify (NYSE:) broke above the downtrend yesterday, and the RSI continues to rise. That is bullish, in my opinion. I know the company reports next week, which will have a big say in what happens. For now, $30 is resistance.

Shopify Daily Chart