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Aura of the Triple Witch

Triple Witching Weeks have tended to be down in flat periods
and dramatically so during bear markets. Market performance this week could be
a big tell. If the week ends higher or is not down big, it could be an indication
we have seen the worst of the Ukraine War decline. Positive March Triple Witching
weeks in 2003 and 2009 confirmed the market was back in rally mode.

NASDAQ Composite, NASDAQ 100 and Russell 2000 have all hit
the official bear market levels of down 20% from their respective highs. The fact
the DJIA and S&P have not come close to down 20% on a closing basis (Down
11.3% and 13.0% respectively) is somewhat encouraging.

March Triple-Witching Weeks have been quite bullish in
recent years. But the week after is the exact opposite, DJIA down 22 of the
last 34 years—and frequently down sharply. In 2018, DJIA lost 1413 points
(–5.67%) Notable gains during the week after for DJIA of 4.88% in 2000, 3.06%
in 2007, 6.84% in 2009, 3.05% in 2011 and 12.84% in 2020 are the rare
exceptions to this historically poor performing timeframe.

Stock options, index options, index futures, and
single-stock/ETF futures all expire at the same time four times each year,
March, June, September and December. This event is referred to as Quadruple
Witching by some. We prefer to call it in the Stock Trader’s Almanac
(2022 page 108), Triple Witching as single-stock futures are a tiny market.

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