Investors buy companies or sectors they believe are positioned to perform well over the foreseeable future.  Traders buy or sell anything that might change in value over the next day or so.  Investors take little risk over a weekend, when the stock markets are closed.  Traders take much risk over weekends, when politicians can make news (think Greece).  To prevent being stuck in something that is losing value over a weekend, traders often sell everything on Friday afternoons, so they can be all-cash over the weekend.  That is the primary reason that Friday afternoons are the most volatile day of the week.

Today is not only a Friday, it is also an expirations Friday, when many derivatives rollover and reset.  It is called Quadruple Witching and adds even more volatility.  (If there is a derivatives failure, as I have feared for some time, it most likely will come on a Quadruple Witching Day!)  As if all that wasn’t enough, it is S&P Rebalancing day.  Plus, the market has experienced a large number of days recently with 1% moves up or down, indicating some instability, which is somewhat worrisome.

At this time, the futures market indicates a 80 point increase in the Dow when it opens at 9:30AM.  So, expect volatility today, but don’t be concerned with whatever happens.  We normally study market closes everyday but NOT today.  You shouldn’t either.