$SPY is Up Today – Quadruple Witch Tomorrow

Stocks are rallying to recover some recent losses Thursday and the S&P 500 has gained 16.75 points to 2142.52 after a one-week 60-point tumble.

Treasury bonds are under pressure, however, even as investors digested a hefty dose of sluggish economic news. The data included reports showing a .3% drop in Retail Sales, a .4% decline in Industrial Production, a flat Producer Price Index (PPI), and ongoing weakness in manufacturing (NY Empire State Index). The Philadelphia Fed Survey served as a bright spot and, lastly, Business Inventories came in as expected.

Still Treasuries are suffering losses and the yield on the benchmark ten-year is creeping back towards September highs north of 1.7%, up from 1.54% less than two weeks ago.

Crude oil lost 10c to $43.48 and gold dropped $10 to $1316.

On Wall Street, ten of ten market sectors are higher, led by Technology (XLK), Energy (XLE), and Telecomm (IYZ).

CBOE Volatility Index (VIX) is down 1.99 points to 16.15 and trading in the options market is active heading into tomorrow’s ‘Quadruple Witch’ expiration. Roughly 3.8 million calls and 3.5 million puts traded across the exchanges through the first two hours. Projected volume for the day is 17.1 million and 15% above the one-month daily average.

VIX Oct 30 calls, Apple (AAPL) Sep 115 calls, and Rite Aid (RAD) Jan 8 calls are among the most actives.

Looking forward, the economic calendar holds CPI and Univ of Michigan Sentiment data Friday and housing data early next week before the FOMC issues a rate decision Wednesday. Given today’s weak data, odds of a rate hike seem to have diminished, but players will also be scrutinizing the post-meeting statement for clues regarding future monetary policy and another potential rate hike before yearend.

Expect the choppy trading to continue as events unfold and into the Fed meeting Wednesday. The chart below of the S&P 500 Trust (SPY) shows today’s uptick after the one-week slide sent shares decisively below a 50-day moving average. The ETF, which holds the same companies as the S&P 500 Index (SPX), seems to have found some support around $212.50 per share over the past few days, or 2120 for the S&P 500.

See Tradespoon’s Stock Forecast on SPDR 500 ETF Trust (SPY)

Tradespoon’s Stock Forecast on SPDR 500 ETF Trust (SPY)

We can also see from the daily chart of the SPYders that the average daily moves are much higher over the past week compared to the pattern throughout the months of July and August. In other words, volatility has picked up noticably since the Labor Day weekend and that is true on both up days and down days.

Expect more of the same Friday into the Quadruple Witch expiration. It’s the last day to trade many futures, futures options, and equity options as well. Therefore, active trading is likely ahead of the weekend and then, as duly noted, focus shifts to the FOMC announcement in the middle of next week.