Friday's Quadruple Witching December Expiration

Friday's Quadruple Witching December expiration (contracts for stock index futures, stock index options, stock options and single stock futures all expire) started with 409,000 ESH and 1,500 SPH traded on Globex, trading range 1222.50- 210.75 and an RTH's opening range was 1217.50-1218.00, up six handles. The SPX traded up to 1224.80 early (high of the day) and held in the low 1220s before giving way to the downside. The morning was moderately busy, but the volume quickly shrunk by mid-morning as it sat in tight pockets of two to three handle ranges.

After trading down to 1208.50 and bouncing to Thursday's settlement of 1211.70 area and again traded sideways. Cash imbalance showed 715,000,000 to the buy side and cash close traded 1212.00. We think it's fair to say that you know we don't mind writing, but in all honesty is was an extremely slow day. There was action in the first and last 45 minutes with very little trade in between. The quad witch that used to be one of the busiest days of the year was reduced to ones of the slowest.

Check out our video from the CME with more thoughts on Quad Witch and trading for Monday:

One question still remains. Can the market rally at year end? When everyone is shaken out of their longs from two weeks ago and getting short after a few days of “back and filling”, we will see some type of pop on the upside? Well we see 1330? 1350 or 1385? Not this year. Including today we have nine trading days left in 2011, and so far the only thing Santa has given Wall Street is a bag of coal.

Our view? If the price action persists we could be looking at the old November lows at 1160. That said the Santa Claus rally really doesn't start until the last five days of the year and the first two days of the New Year. If it doesn't come the first two months of the year could be down. As for today, is the second to the last Monday in 2011. With the markets so short we think it's possible we see higher prices. The big question is can they hold on to the gains? We shall see…