Tag Archives: Apple Inc.

Sentiment and Divergence

I’ve been sitting out much of this recent market levitation for a few reasons:

  • My sentiment in February was that we were nearing a top at the 135 resistance on the S&P (here), hence some calendar spreads turned out to be badly timed. It was time to reassess what I was seeing on the charts. A low volume risk-on climb day after day and given reassuring corporate profits, employment, and sentiment numbers, the bulls had a decent argument. They still do in fact, even with a pull back to 135 on the S&P we’ll still be solidly trending upwards. As Europe (re)emerges the bears are finding their way haltingly back this week.
  • This parabolic rise in AAPL simply looks like a classic end-of-cycle bull market to me, as mentioned here. You can’t stop hearing/reading/watching AAPL pundits. That screams, ‘bail’. Nearly everyone holds and continues to buy AAPL. It used to be that the Apple faithful were geeks arguing against the behemoth Microsoft. Now the financial community has taken up the kool-aid. I don’t believe the two mix well. Where $AAPL goes the market is likely to follow.
  • I’ve also been watching Europe, while living here. Greece, Spain, and Italy are serious problems both socially and economically. Besides the obvious election year politics in France, pushing the periphery onto the media back-burner, and the LTRO, have clearly been market-risky. The sovereign spreads are starting to widen quickly again and we’ve seen this story play out before. Very recently ‘parity’ was being whispered, and quickly avoided with the X summit. I expect more summit’s this summer. The Euro is so closely tied to the peripheral-risk, that no-one has any idea how bad it might really get, how long it might take to rebalance, or what solutions have fundamental effects. The risk on sentiment is only being played out on the equity markets or in dollar lending. The euro and euro lending is on ice. What impact will this have on the US markets is unclear.

Yesterday the QE3 ‘reassessment’ was striking and missing the gold short trade was clearly a mistake and still resonates in my head this morning! Add the falling euro too falling gold, no QE3, high oil prices, a low VIX and I’ve plenty of arguments to hold off the bulls atleast until the S&P pulls back to 135.

I’m going to continue holding my 140/135 bear spreads I mentioned here. I’ll be also watching gold closely as the levels I mentioned here have been triggered. The $SPY feels toppy again to me, will I be right this time?

Good trading.


Pre-open Indicators

I like to look at the state of European markets pre-open. Here’s a chart with $AAPL thrown in for fun. No data on the $VIX until after the open.

Bear spreads 140/135 on the $SPY are on my mind.


Good trading.

AAPL Holding Up the World

Is AAPL Holding Up The World?

I’m baffled at the near parabolic ascent of AAPL. We all know the history, the soap opera, the religion, the brilliant (though not diverse) products, the cash, the dividend, the buy back, etc. Ok it’s a great story, but recently I have the feeling they’re holding up the world.

These are some indicators I follow with todays data.  I added AAPL for a perspective.

AAPL Holding Up the World

I didn’t add the $VIX but it spiked up with the sentiment miss this morning. Will the VIX follow AAPL?

Good Trading.

Is 5% the New 1%?

Judging from the overwhelming optimism it’s time to buy!

  • AAPL is going parabolic and is now worth more than Poland (Apple has 2 products)!
  • Europe is safely contained thanks to the ECB’s LTRO.
  • It’s an election year and with oil prices are at a near all time high – Mr. Obama will likely tone down the war mongering.
  • VIX is relatively low.
  • Renewed confidence in the EUR.USD

But here’s what reassures cynics and contrarians:

  • A recession in Europe will impact the US growth prospects to a greater degree than presumed. Ford is projecting a loss of $600M.
  • Commodity Markets are jittery. GC_F and SI_F fell off their chairs yesterday.
  • IPhones and IPads do not represent a solid market foundation, $AAPL does not create jobs, in fact their Jobs has moved on to better things (hopefully).
  • Housing and Employment. 54% employed 18-24?
  • And my favorite: Even with a 5% correction in the $SPY we’ll still be in a bull market, that leaves a good reversion to the mean.

One thing I’ve learned from losing money is to avoid betting against the trend or calling the top/bottom. That’s a fools game and you’ll be stopped out quickly. On the other hand, now is the perfect time to buy some protection for expiration on the April, May and January time horizons.

The levels that I’m watching on the $SPY are:

  • 138.22
  • 136.63
  • 135.80
  • 134.25
  • 133.72
  • 131.50

VIX Chart

Is the VIX Flashing a Warning Sign?

For the entire length of this 3 month rally, the upward steps have lingered under 1% and usually under .5%. Only in the last 10 days has the VIX started to signal caution. The VIX is now solidly over 20 and approaching it’s recent high of 22.

Yesterday at the close we saw an unusual large pop at the close, and today we saw AAPL collapse 25 points in 5 minutes. AAPL lost it’s luster very quickly today, and that’s worrying… Euphoria is the word I’d use. Everyone has AAPL, literally, so sell. It’s hard to write that, given how popular, rich and well regarded that stock is. For how long the euphoria might continue is hard to say, but I read here that they accounted for 90% of the gains for the NASDAQ in yesterday’s trading. Strange. Buy some protection if you’re long AAPL.

VIX Chart

Option expiration is coming up this Friday, and tomorrow’s PPI and claims numbers risk to add fuel to this VIX fire.

Greek Bank Exposure THEN; Eurozone Crisis NOW

What’s going on with the Euro? Early this summer the question was: do banks have a dangerously large exposure to Greece? In June the numbers were very maneagable. Now “all of a sudden” they’re un-maneageable. What’s changed? If anything you would think, European banks have been managing their risk favorably since well before June. They were warned.

This June article from Reuters cites between 40 and 100 Billion but with little consensus.

  • “The main conclusion I draw from all this is that no one really knows what the effects of a Greek default would be — but that non-Greek banks are unlikely to be the main vector of any contagion. And while Kash is worried about US banks’ derivatives exposure, I’m pretty sanguine on that front, too.”
So I went back to Kash, who seems to follow this unravelling seriously. He’s asking what caused the crisis, and whether there is a local or systemic problem with the Eurozone, whether capital flows or budget deficits have played a role. We’ve moved on from the banks. But his conclusion is interesting.
  • “The eurozone debt crisis is big enough that there’s plenty of blame to go around, and some of it certainly should go to the crisis countries themselves. But it must also be recognized that as soon as those countries adopted the euro, powerful forces were set in motion that made a financial crisis likely, and very possibly unavoidable, no matter what the governments of the peripheral euro countries did. Irresponsible behavior by the periphery countries did not set the stage for the eurozone crisis; the common currency itself did.”
The common currency set the stage for the crisis. As a trader how should I consider this? Is the common currency starting to die a slow death? I find that hard to believe given the budget deficits of the US, and the rise in Gold as a popular safe haven. Alternatives make for good competition and taken together the Eurozone budget deficit looks small in comparison.


Atleast in the short term, shorting the Euro ($EURUSD) in favor of the dollar feels counter-intuitive after it’s recent decline, even in-light of the Eurozone problems.


American bloggers and the popular press like to scream that the Eurozone countries are unable to work together and as a result the common currency is destined to implode. At the same time, dear pundit, look at the pissing match in Washington…


I’m still not sure where the risk is higher.


ZeroHedge has a great article on current risk perceptions. My favorite quotes from this posting are on Margin Debt:
  • Although margin debt is coming down it is still historically high and at levels that preceded major selloffs such as September 2008. In fact margin debt is now higher than that of the dot com boom.
  • As long as stocks like AAPL continue to set all time highs I believe there is no real fear in the equity markets and thus no forced equity liquidations yet. AAPL may be the best company out there but there is little to no short interest to support selloffs and with everyone all in on the long side and leveraged once selling begins it will be fierce. Remember AAPL is the ATM and when people need to raise cash to meet margin calls they are forced to sell their most liquid position.
This is very true for $AAPL investors. Watch out.

Spinning the Weekend

With about 2 hours before the beginning of the end of the week, here in Europe we’re down about 3%. The Euro is consolidating around 1.43 and vacationers are dribbling back into Paris. After yesterday’s list of bad news, today is likely to be calmer – though options expire today, so I’m curious how the VIX presents itself. I’m cleaning out of my expiring option positions today. USO, SPY, FSLR.

Yesterday’s rout of HPQ had to be the craziest, most complicated manipulation of an earnings announcement I’ve seen. I’m guessing they put weeks of effort into this strategy… Or someone completely screwed up… I’d like to know which!

  1. Leak to Bloomberg at noon (Bloomberg falls all over itself for about 3 hours…)
  2. Trading Stopped – confusion
  3. Autonomy confirms leaked rumors – Autonomy trades under AU (Gold…) in the UK and stock jumps 45%
  4. Trading stopped again – more confusion
  5. Earnings are released early.
  6. Stock jumps 3 points for about 10 minutes
  7. Stock starts falling and doesn’t stop… HPQ will open down 12% this morning.
I was thinking about selling straddles at the close, but didn’t get the chance.
Obviously some changes are being made and strategies revised at our favorite tech companies. GOOG is buying Motorola Mobility, CSCO is laying off and starting to re-focus on core competencies and AAPL is surfing the content/platform wave. Extrapolate a bit and we’re seeing “Software Companies” like Google, Microsoft and Facebook preparing to go after Apple, Hewlet Packard and Dell. “Hardware Companies” are desperately trying to get in on the party.
This is a fundamental shift. Eventually we’ll stop referring to them as hardware and software companies, but with words like platform, infrastructure, and service. They might one day be considered conglomerates like TYCO and GE. MSFT is well on it’s way IBM is almost there, but markets will take some time to get used to innovators turning into conglomerates. The markets are just starting to digest this shift. These conglomerates will outsource innovation and start to pay dividends.
I’m going to get lunch, more later!