Good morning traders,

There are two things you need to be aware of from a mechanical standpoint this morning.  First, today is Options expiration, which brings with it all the associated fun of potential pins in some of the big, active stocks.  (It does seem as though maybe the weekly options have somewhat reduced the impact of the monthly OpEx date though.)  Second, the SPY goes ex dividend today.  I do not know the exact amount of the dividend, but would expect something in the .70 range.  From a practical standpoint, this means that all of your market reference levels are invalid in SPY.  You have three choices here:  ignore this fact, adjust every level over the last three months by the dividend amount, or use a more appropriate market proxy like Cash or the futures.  (If you are completely new to these issues, this post might help.)  Just be aware of this as you consider your market support and resistance levels today.

As of this writing (7am New York time), we are coming in to find a market that has reinforced yesterday’s range in the overnight session, with the futures locked between 1236 – 1240.  This range will be my inflection point for the day, though I do not want to initiate on a breakout in this environment.  If the market trends today, which I believe to be fairly likely, you do not have to be in the first leg.  We are also watching a bigger picture bull flag on the daily charts, and it is possible to view yesterday’s action as the beginning of some upside momentum and the first break out of that flag.  If this continues, first target is a retest of the highs from last week.  Failure of this swing would point to another downleg, which might bring us in to around 1,220 on the March futures.  My subjective sense is that we are probably headed higher, but be flexible.

Yesterday, we saw dramatic moves in MA, V and AXP, so those will be on my radar for potential second day plays.  I continue to be very focused on Gold and Silver, as the precious metals complex is showing some potential weakness on several timeframes.  From a daytrader’s perspective, the moves in the metals have been anything but clear over the past week, though we did get a nice flush in Gold as it dropped the support levels I mentioned in yesterday’s morning note.  At the beginning of the week, I thought the US Dollar was nicely setup for another leg down, but support held and I no longer see a crystal clear setup in the Dollar.

In general, I have been finding the best opportunities in Financials, Tech and Materials, so I will continue to focus on those today.  As always, I will rely on the in play list from the SMB Radar (which I will tweet again this morning, so follow me on Twitter as AdamG_SMB) to find good setups in the morning that offer good potentials for trends into the afternoon.

Be flexible and be respectful of expirations today.  Good luck.

(This note was written earlier than usual.  If something changes significantly before the open, I will update either here on via Twitter.)