Rumors of an AAPL Flash Crash/Pair Trade

Who knows who's right, but there's a site that is talking about the AAPL end of day decline vs the ES end of day pop and is insisting this is a long AAPL / Short ES pair trade being unwound at the close.

There's no proof of any such trade en masse existing by their own admission, it's something they think is confirmed by the end of day action. This is 800,000 shares of AAPL sold in the last second, but by  their own evidence the orders are routed through various exchanges which is something that is done when large orders are accumulated or distributed so one large order isn't seen on one exchange, this eliminates the probability of High Frequency Trades. As they also admit, "it looks premeditated" as would a stop run, but to pull this off, they'd have to sell 800k shares in AAPL through various routing centers as well as cover the offsetting amount in ES.

Sometimes we forget that for every sale there's a buyer and vice-versa. lets take a look...

This is what the pair trade looks like-if it was a pair trade, the SPX (as ES went up) goes up as AAPL goes down, AAPL is being sold and ES is being covered according to their pair trade thesis.

 Using the same version of 3C as we use on ES, we look at AAPL, it's actually at a positive divergence at the EOD, which sounds and looks more like stops being hit and accumulated; that certainly seems a lot easier to pull off (bring AAPL below the stop level and they automatically go off) rather than trying to sell AAPL and cover ES all at the same time through multiple exchanges in the last second of trade.

The multiple exchanges would also explain the dump as the stops are a mental condition of traders so they'd all be at the same place-right under intraday support no matter what exchange they are on which is merely a function of who their broker chooses to route orders through.

 If ES is being covered during this then why do we have a distribution signal at that level?

Sure, when they put this chart up it looks like the pair trade they suspect...

However, looking at the same last minute/second of trade, look at these totally uncorrelated assets doing the same thing.

 High Yield Corporate credit being sold as ES is moving up-just like AAPL

Junk credit doing the same.


And these are only 3 of 4 assets I looked at, so unless credit has some implicit correlation with AAPL, I'd like to hear how they explain the same moves made in credit as AAPL, sounds more like plain coincidence and a last minute stop run in AAPL.

Lastly, for such a strong, unabated sell-off of AAPL en masse, the closing candle sure doesn't look like there was nothing but pure supply in AAPL.

That's pretty close to a bullish hammer, if it was all supply like they are leading everyone to believe, the close would almost certainly be at the low.

Truly Lastly... Why not close this trade throughout the day rather than the last second of which the logistics of selling through various routing centers would be a nightmare (unless all of the separate routing was due to individual hedge funds that all did the same trade all together at the last second which would be another logistical nightmare with no upside for any one fund as the overwhelming supply would knock their fill down) , but if it were simple stops hit, it would be exactly as it looks as individual retail traders are routed through numerous centers depending on their broker.

Sometimes people are so smart they need to be pulled out of the rain.

AAPL Stop Run

If I had to guess, I'd say that any move in AAPL, Tech and the Q's to the upside will likely start early in the a.m. although watch out for AAPL gap up openings as they seem to always get sold.

Toward the close tit looks like the market maker decided to take advantage of any day traders exiting or short term traders wrapping up positions before the weekend and run the stops, remember that Japanese video game that was mistranslated? "All of your shares are belong to us !!!!"

Why do I say this? Well unless it was an op-ex pin, which I doubt, these charts seem to clear things up.

 The 50-5min moving average is the one short term traders watch, note volume pick up as price crosses above the average and how it spiked as price crossed below and below the afternoon range/support. That makes it easy to accumulate because you have better prices, but more importantly, you have supply which is hard to come by in size (at least in their size).

 The 2 min seems to show a plan ahead of time, either they were selling some shares to pick them us cheaper or doing just enough to remove some support from AAPL, but there was no downside 3C confirmation, it stayed positive indicating the shares were most likely accumulated.

You also don't have a longer 5 min chart look this good all day to start a tiny sell off at the end of day and dump shares.

Just watch the support/resistance areas, the volume and 3C if you have it.

UNG follow up

OK, I'll try to do the last post on UNG some justice. First of all for new members, this is one of my favorite long trades, it's not exactly the asset that is "Most talked about" in the groups, but it is an asset that I believe has a long term secular bull market ahead of it.

Now that Obama has been reelected, I think some of the uncertainty has been removed and UNG will benefit from the push toward Energy self-relaince and clean energy. When we first noticed a change in character, before UNG even made any move up, we knew something was up, but didn't know why. I commonly say that you can have certainty, but you can't have certainty and make money too, by the time you understand why (when you are watching underlying institutional trade) the potential gains have already been made.

However a few things seem obvious. The first came when the EPA put out new rules for any new power plants in the US, the emissions restrictions made only two sources viable for new power, nuclear (which is why we have been in and watching URRE) and Natural Gas. The second event that raised my eyebrows was Bernie's semi-annual Congressional testimony (WE WILL NOT MONETIZE THE DEBT-LOL!!!!); Bernie isn't a specialist on clean energy, but the testimony is like the Superbowl for the financial world. One Congressman asked Bernie if he thought Natural Gas as a part of US energy independence was a good idea!?!?!?! Right? What the heck does Bernie know about that? Nothing, it's totally out of his purview , but the Congressman wasn't asking a question, he was pitching Nat. Gas like a Budweiser commercial during the Superbowl and the tone of Bernie's response acknowledged that.

So our feelings about UNG were based totally on technical concepts, soon after it was on our radar we predicted the downtrend would end and a base would form, that happened...

These are some of the initial observations.

Although there were 3C signals before this, the long term 2 day chart confirmed our suspicions and many members made 20+% in the base alone.

Recently there was a head fake move and a pullback, it's something we had been talking about around the time as necessary for UNG to move from stage 1/ base to stage 2/ mark-up and looking back, it seems it was definitely tied in some part to the presidential elections as the outcome could vastly change the outcome for UNG. For more about the head fake move, the pullback that saw accumulation and yesterday's pullback on the EIA natural gas inventories and what we expect moving forward, see this post from yesterday.

I'm not usually a fan of using leverage like options over a long period, however in this case, I think it makes some sense, especially if during the period of the contract, we can get a stage 2 mark-up as that is what attracts retail to the issue as they think that the breakout and volume surge is smart money buying-it actually is not, smart money has been in for a long time, but that is one of the ways Technical Analysis dogma misunderstands the market.

Yesterday's post linked above explains the correction in UNG and gives an estimate on the time needed to turn back to the trend, it's very short, but still a process and not an event.

The daily chart (using color coded candles representing a modified "Clear Method Trend Analysis") shows a strong trend coming off the 9th of January which saw strong accumulation, this was the pullback from the head fake breakout. Yesterday's decline was on an EIA draw of nat gas for the week. Today's close on a Doji Star candle is a typical reversal candle, but as I said yesterday I think we need a little more of a "U" shape to the reversal (which allows accumulation of the lows); additionally the volume today was not increasing over yesterday's, when we have a reversal candle with increasing volume the probabilities of a successful reversal the next day are extremely high. So in conclusion, I wouldn't be surprised to see another reversal or confirmation candle, maybe a hammer or another star/doji, etc and I'd look for increasing volume so I think there's still plenty of time to get in to the trade.

Momentum is close, but not quite there, MACD (long setting of 26/52/9) should go positive, Stochastics should move clearly out of the 20 area and both RSI and momentum look good, but could look better.


As to today's charts and underlying trade...

 This is the transition from the confirmed downtrend (green) to the left to a positive divergence. Remember I said we needed that one final pullback to push through the base? Well it seems one condition was the presidential election because after that look at the strength in the 3C divergence on a pullback (by the way, this is what we want to buy, a pullback with confirmed accumulation, we don't want to chase trades, but be patient and let them come to us on our terms).

 Here's the loss of momentum, but nothing more than a light relative negative divergence before the Eia report. After the report and the move down in price we see 3C accumulation, in fact we had a draw the previous week as well and UNG rallied, so it seems that this EIA report was going to be used for a pullback and that had been decided days in advance.

Basically I'd like to see a little more "U" shape to price and the divergence to move from the 5 min chart to a 10 or 15 min chart, then I think we are good, but I would have absolutely no problem with entering today either, we are really getting myopic at this point.

UNG Trade Idea-April Calls

I don't usually like options for this kind of reason, but I think UNG will be significantly higher by then. I'll post the charts next, but I wanted to get this out.

I would say UNG may have 1 or 2 more days in this area at most.

Maybe not even that.

The Q's

Here's a look at the Q's from short term to long term.

In my opinion today most likely has ben an op-ex pin as the Q's are loitering around $67.0 and the  SPY at $150.02 (nice centennial psychological mark), both of them 2 cents from  strike and a pretty significant one in the SPY.

 NASDAQ futures were crystal clear last night, I posted the unmistakable positive divergences in the NASDAQ and SPX futures and they did what they were supposed to do. Then there was a negative divergence in both, many times we'll see something like this just to kill upward momentum, support or fuel is being removed from the market to keep it from rising, then a series of small adjustments are made through the day to keep the asset hovering straight and level. Looking at the NASDAQ futures above, the green arrows are "in line, 3C is confirming price, there are no divergences, so we went from a huge signal to another huge signal, they both did something and the rest of the day was virtually dead. That looks like an op-ex pin to me and that makes Friday's my least favorite day now.

 The QQQ shows an early positive lifting price and then a late negative dropping price to essentially keep it right around the mid point or $67.

 The 2 min chart seems to have a sharper negative divergence late in the day, I'm not sure what that's about.

 The 3 min chart shows the same as it migrated over from the 2 min chart so it looks like there's some sort of intraday distribution end of day.

 On the more important 5 min chart, where we first get a look really of what institutional money is actually doing, the QQQ today is absolutely FLAT, 100% in line. There are no divergences of any magnitude today from institutional money here. The positive divergence on the 18-22nd was very clear at the time, it even looked big and that's how we knew the Q's and AAPL would be up that day, but look at the 3C action that day, very negative, distribution and that's why we closed the AAPL calls, took the profit and stepped aside for earnings after hours.

While I suspect a gap fill in the QQQ as XLK and AAPL show short term, there's serious damage and much of it done over the last 2-3 days.

 The very important 15 min chart, this is the big picture and this is why I want to have shorts already established, maybe not all of them at full size, but I want my feet in the water.

Note the accumulation right before the move up of trend #1, you can sometimes gauge the distribution period by how much accumulation there was, they had to buy the shares, then they have to sell them and often co short as well, so distribution tends to be longer than accumulation.

 The 30 min chart with trend 1 accumulation, trend 1 distribution and a head fake move on place, I don't know if it is final, but we needed one and we were expecting the Q's to put in one and there it is in yellow, so technically we have everything we need to dovetail in to trend 2.

The entire cycle from 11/16 on 1 60 min chart, again note accumulation for trend 1, but look at how sharp the leading negative divergence is on a 60 min chart no less and most of it is right at the head fake area and on.

This is a huge move in 3C for a 60 min chart, so my guess is any short term strength should be used aggressively to short in to, I think it's time to bring out that word, "Aggressively".

Of course that's my interpretation of the charts as they are, if the underlying signals change and the message of the market changes, we have to adjust.

People make the mistake of believing the stock market is like a weather forecast, it's much more dynamic than the weather with thousands more triggers that can change flows instantly.

I still think we are very much on the right track and fell good about all recent positions.

AAPL short term charts.

 2 min chart, a possible inverted H&S base, but I don't really care about that.


 The 1 min chart shows the highest probability trade in AAPL's history, FADE the a.m. gap up, always works.

 3 min chart leading positive at the same area as the 2 min chart and leading above point "A"


 The 5 min chart, remember closing al the AAPL Calls right before earnings that day? Then AAPL fell hard, we had great timing on those calls. We also have a leading positive divergence here as well, sort of like Tech.

The 10 min chart is really no more than in line so as of now, I se this as a short term trade and I'll elaborate in the next post which will cover more.

AAPL Calls-Speculative -Feb 445

I think you have to consider this speculative, but if the NASDAQ 100 needs some help AAPL may still very well be the go to asset to get that gap filled.

I like the Feb monthly $445 calls, although I'd want to spend the least amount of time possible in them.

I'll repeat, this is speculative-that means it should be reflected in risk management.

AAPL Trade Idea (long) for a bounce

There are some interesting signals in AAPL, there's a long term signal toward the long side, but I don't think we are there yet, but just as TECL / XLK look like they want to fill that gap, the same one I've been talking about in the Q's, AAPL also looks like it wants to as well. I might consider this a VERY speculative options (Call) trade.

I'll get charts up ASAP.

TECH Bounce Trade XLK / TECL (long)

Here are the charts for XLK, TECL and TECS as a confirmation asset.

 There's the gap mentioned, there's several stops within the area, the most obvious of course is below the lows of the last 2 days, but if I did that it would not be right at the lows, give it a little room, you know how those orders always get hit.

XLK

 This is only a 2 min chart, but it is leading positive in a pretty big way.

 This is a 10 min chart, there's no sign of anything positive here, that's why I think it's a short term trade just to fill in that gap.

TECL (3x long Technology)

 The same 2 min leading positive as XLK.

 There's some migration to the 3 min chart with another leading positive. If the divergence were on the 1 min chart only, I'd say it's consolidation, but beyond the 1 min chart and the probabilities go up.


 Here we even have it on the 5 min chart.

 And impressively, on the 10 min chart. When I saw this I thought this may be more than just a gap fill.

 However out at 15 mins and there's no sign of anything positive so I don't see this as too much more than what it was pitched as.

TECS (3x short Technology).

This should give signals that are roughly the mirror opposite of XLK and TECL above.

 3 min chart is leading negative.

 5 min leading negative.

 However capping the move, the 10 min is in leading positive position, it could be more impressive, but there are no signs of anything negative there so it looks again like the move is capped to a shorter term move.

The 30 min chart of TECS is in an impressive leading positive divergence so I'd probably want to try to tide TECL up a bit and then use that price strength in TECL (weakness in TECS) to buy TECS at a better price with less risk and higher probabilities. This is letting the trade come to you, just taking advantage of the journey along the way as well.

Quick long trade

This might/probably is a day trade, I'd go with TECL.

I think Tech will try to fill this gap, related to the Q's gap as well.

I'll post charts, I'd take the trade now as long as it's understood it may be a day trade only.

Chart of Interest

Here we go, the big picture. The divergence and the possibility of a persistent negative divergence which we have only seen in the futures and only a couple of times is what really got me thinking about this and it's quite interesting, I think it also may be illustrative of what trend #2 may actually look like. Again just like with trend #1, take whatever your wildest thoughts within reason are for a target and then apply a multiplier as the market always moves like a pendulum, way too far one way and then way too far the other. Remember, it's an emotional creature and those pulling the levers know that.


SPY Example

 OK, using the 15 min chart (a very useful chart in a number of ways), we have:

A) The June 4th bottom that we called in advance, it was a head fake low below a triangle, note the positive divergence as well, which os part of the reason we could call it and buy the lows.

B) The trend higher is confirmed as 3C makes higher highs and higher lows with price.

C) This was one of the hardest calls of 2012 because as many people reminded me, "Don't fight the F_E_D", but we had a negative divergence at the 11/13 announcement of QE3 or 4 (depending on how you want to count)

D) A positive divergence going in to the 11/16 lows which started a new cycle (the 4 stages)

E) The prediction of a pop to the upside, volatile, but short in duration COMPARED to Trend 2's signals. Here we have the worst leading negative divergence in well over a year because the Q1 2012 negative divergence wasn't this big.

So we look for the longer charts to go negative and then the shorter charts to come around for timing, the divergences should migrate out to longer timeframes, the longer the timeframe, the stronger the underlying action.

 Looking at a 1 min chart, I'm not impressed or excited, I see yesterday's clear negative in to higher prices and the failure, I see choppiness today, but in a leading negative position.


 Zoom in that same 1 min chart so we are looking at intraday moves only, there's a negative on the open and a slight one recently, the rest of the day is in line, no positives, no huge negatives.

No Big deal, maybe this does look a little like a weekly op-ex pin as they tend to be right around the previous day's range and have only slight adjustments throughout the day, then again, maybe not, it doesn't really matter to me.

 This however does. I already know that the trend in most of these timeframes is at a deep leading negative divergence, but what I'm looking for is the short term charts to go negative and to get worse until they more or less meet up with the long term chart's indications. A 10 min chart lading negative is interesting to me.

 A 15 min chart-especially in the price area we are in (near SPX 1500-we were there yesterday) leading negative is interesting to me.

The 30 min chart is not as sharp, but that's because the divergence is migrating from short to long timeframes so this leading negative looks exactly as it should and is interesting to me.

Here are some others.... Sorry about the randomness, I'm trying to work fast.

 DIA 10

 DIA 15


DIA 60? Yep

 QQQ 15

 QQQ 30- already has the head fake move built in (For newer member's we almost always see a head fake move of some sort just before a reversal in trend, there are lot of reasons why-email me and I'll send you my articles on why).

QQQ 60 min?!? Yep

 Energy 15-remember I didn't like shorting this sector a few days ago, it's changing.

 Financials 15


 Tech 10

Tech 15

3x long financials-15 m (just because I like the 3x short-FAZ).