Mutual Fund Investors

are beginning to flee RMV (small cap value) and RUT (small cap).

EEM (emerging markets) set to do the next big fall.

Nasdaq

tried very hard to stay above 50 today. In the end the bulk of the put contracts with strike at 50 are disposed off and turned worthless. But the option sellers would have to pay a little bit of money to the puts at 51 or higher.

The incremental returns for pushing the market to 51 or higher is not great for option sellers, given that they need to start paying for calls as well. Given the market condition, it may cost too much to try push the market that high. The effort at the last 20 minutes was just to make sure they didn't lose the 50 strikes.

Tomorrow

is option expiration date, and the QQQQ target price has drifted to 52.4. We'll see if the option sellers will get their price.

QQQQ Target Price, Again

QQQQ Target Price is currently 52.5. This is the option seller's "best wish" price for this Friday, when all the options expired. This is also called the "maximum pain" price from the view point of the option buyers.

The target price is the equilibrium point between the bulls (call buyers) and bears (put buyers). Right now, most of the calls have a strike price around 54 and most of the puts have strike prices around 50. If QQQQ goes to 52.5 by EOD Friday, most of the calls and puts will be out of money and expire worthless.

On the other hand, at today's closing price of 48.73, the option sellers owe an obligation of around $429 million to the put buyers.

Usually, the options sellers get their way -- the options usually expire at maximum pain to the buyers. But this week the market seems to have a mind of its own. Will the option sellers again get their way? We shall see.

Where will the money go?

Realestate and finance has some time to go.

Emerging markets are crumbling.

Oil & gas are over-extended.

The high fliers on Nasdaq are getting tired.

Where will all that money go?

There are some clues: long languished old techs like Microsoft has recently come back to life. Even Nortel is showing some signs of life.

Sector Rotation

Out of: Finance, China, Real-estate.

Into: Agriculture, Metal Mining, Gold, Technology, Semiconductor, Biotechnology.

QQQQ's move toward to 53 area has scared away a bunch (about 40% of what was there as of yesterday) of call contracts congregated on 53. This opens up the path for it to move higher. On the way down, a huge amount of put contracts has congested the 50-52 area, preventing Nasdaq 100 from going down to that area any time soon.

China's decision to close up the pipe to Hong Kong was our loss, but China's gain. Otherwise, all the money in Chinese savers accounts will flow to Hong Kong then on to Wall Street bankers wallets.

QQQQ Target Price

52.9