Something Has to Give or Go

Daily Continuation

As alluded to, the over sold condition of the market extended early Monday morning to find support and develop a counter trend rally. Nothing major but a reversal day was over due for this market. How far does it proceed is anyone’s guess during the expiration process. After 5 consecutive declining days, it should be expected that prices rebound 33-50% of last weeks declines. More interesting to me is the dramatic and large spread between the Nov and Dec contract. During last week’s decline this differential got large (see chart below).

Spot November less December Contract

That differential blew out last week, expanding 25%. What happens— does Nov chase Dec during expiration of does Dec collapse and give up the premium after becoming prompt. My best guess is a combination of both.

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