Quadruple Witching December Expiration Day Is Here

Friday, December 16, 2022-- Mptrader Pre-Market Update: Quadruple Witching December Expiration Day is here!  LOL... Who knows what it really means for the markets-- other than volatility could ratchet up dramatically, especially very late in the session. For starters though, we will find out something about the impact of expiration at 9:30 AM ET when the December index and single stock futures expire, but thereafter, we will have to wait until 4 PM ET, when the December Cash index and individual company stock options expire. It could be wild, or it could be uneventful, but given the intense selling pressure since Tuesday's post-CPI downside reversal spike that initiated a decline in ES from a new multi-month recovery high at 4180 to this AM's pre-market low at 3871.25 (down 308.75 points and -7.4%) AND has created a LARGE WEEKLY BEARISH ENGULFING CANDLE (aka, a Weekly Downside Reversal Spike), I am leary of expecting a near-term oversold bounce to emerge just yet. 

With the foregoing in mind, my attached Weekly ES chart shows the post-Pandemic period and designates the WEEKLY Bearish Engulfing Candles that have occurred during the 2022 Bear Market (defined as a series of lower-lows and lower-highs). So far this year, there have been two prior Weekly Bearish Engulfing Candles, during the third week of April and again during the second week of September, and BOTH triggered significant downside follow-through weakness amounting to 14.8% and 10% from the close of the particular reversal week. 

if ES is unable to recover and CLOSE above last week's low at 3945.00 to invalidate the Bearish Engulfing Candle, then this week's bearish signal will be confirmed, and as such, my expectation will be for downside continuation next week, which if accurate, EITHER means that the Santa Claus rally either will have to wait until AFTER Christmas, OR it will have to wait until the third week of December 2023!  Last in ES is 3886.50...

More granular chart analysis will be posted shortly... MJP