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S&P 500 & FTSE 100 Forecast: Option Expiry Headwinds Return

S&P 500 & FTSE 100 Forecast: Option Expiry Headwinds Return

S&P 500, FTSE 100 Analysis and News

  • S&P 500 | OPEX Offers Potential Headwinds
  • FTSE 100 |Relief Rally Faces 200DMA Test

S&P 500 | OPEX Offers Potential Headwinds

A rather choppy week, however, the recent lows remain intact and thus I remain bullish above 4100. That being said, there do still remain downside risks in the form of geopolitical tensions, which has been mentioned at length. Alongside this, next week is OPEX (option expiry) and more specifically, the quarterly quadruple witching. OpEx is an event where stock options expire on the third week of the month, which throughout 2021 had typically coincided with equities coming under pressure. As shown in the image below, the cumulative performance of the S&P 500 in the third week of each month in 2021 was -5.8% (Figure 1). Additionally, this year has also shown a similar pattern with the S&P falling 5% in January and 1.2% in February (Figure 2).

Figure 1.

Source: Refinitiv, DailyFX

Figure 2.

Source: Refinitiv

US 500 Bearish
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 21% 5% 9%
Weekly 6% 4% 4%
What does it mean for price action?
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FTSE 100 |Relief Rally Faces 200DMA Test

Having held onto touted key support at 6800 earlier in the week, topside levels in the form of the 200DMA is now in focus. Given the abovementioned OpEx week and with geopolitical tensions remaining in the backdrop, prior support now resistance looks to cap the recent relief rally. Keep in mind that as we head into the weekend, prudent traders will look to lighten up exposure in order to avoid gap risk.

FTSE100 Chart: Daily Time

Source: Refinitiv

Price50DMA100DMA200DMARSIIG Sentiment
Europe
FTSE 100717674497356722343Bullish
DAX1362515083154161550740Mixed
US
S&P 500425944874564446742Bearish

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