The major stock indexes are finally declining lower. Since December 19, 2011 the markets have rallied higher. Lately, every intra-day pullback was being bought by investors and traders. Many people are now calling this a market top, however, one day does not make a trend. These market were severely overbought and extended, therefore, a pullback or decline was certainly overdue.
This coming Friday is also options expiration. There were many small retail investors that were buying call options near the recent highs in the market. Rarely if ever, will the institutional money ever allow the small retain options traders to collect a gain in the near term call options. Traders and investors must not make too much out of today’s pullback. After all, the trading volume that has lacked conviction on the upside is also lacking the conviction on the downside today. The trading volume on the SPDR Dow Jones Industrial Average (NYSEARCA:DIA) is just 4.05 million shares as of 3:30 pm EST.
Many leading stocks will often experience erratic action during the trading week leading up to Friday’s option expiration. Just look at the action in popular stocks such as Amazon.com Inc (NASDAQ:AMZN), Google Inc (NASDAQ:GOOG), Netflix Inc (NASDAQ:NFLX), and CF Industries Holdings Inc (NYSE:CF). Traders and investors should expect the crazy action to last into the end of the week.
Nicholas Santiago
InTheMoneyStocks.com
