The lovely Andrea...
As for today, the NASDAQ finally broke its winning streak apparently on the news they lost a lawsuit brought by Smartflash for patent infringement with a penalty of $533 mn. In addition, AAPL as well as several other companies including CISCO were booted off the Chinese state procurement suppliers list as they are accused of being an extension of the NSA's cyber-spying, thus no more AAPL products for the Chinese government.
Who knows how much of this stuff is known ahead of time, I was actually a little surprised to hear Appaloosa has sold its entire AAPL position in Q4 2014, just because AAPL in a bear market would be the cleanest dirty shirt in many ways, although Appaloosa has the ability to go short.
The fact the NASDAQ couldn't close green on AAPL's -2.56% day (one of the biggest drops in 6 months that is non-earnings related) makes last night's Daily Wrap post and chart showing the 5 NASDAQ stocks that are responsible for ALL of the NASDAQ's 2015 gains which included AAPL at the very top, very timely indeed. This is the magic of index weighting. At one point after NASDAQ has released historical weighting (they have a proprietary formula for weighting the NASDAQ Index which will cost you a $10,000 a year subscription to find out), I figured that AAPL's weight on the NDX-100 alone was equal to the bottom 50 NDX stocks combined, so if we took those bottom 50 weighted stocks and added AAPL and the bottom 50 averaged -2% on the day and AAPL was up +3% on the day, the NDX would close up 1% on the day despite the fact that 50 of 51 stocks declined by 2% on the day.
I'm not going to try to take any victory laps for the break in the NDX as we opened a recent Put/short on the QQQ because of AAPL, which we also opened a recent short / Put on as well, I work too hard on my analysis to take a cheap victory lap on a lawsuit and claim it was analysis. However we have seen something not very refreshing about AAPL, thus the put position there.
In some background news, Ukraine has shut off the gas supply to the rebel held/Pro-Russian separatists of Donetsk in eastern Ukraine, a move that has enraged Putin which he called reminiscent of "Genocide" today. In response, Russia's Gazprom has said they'll be cutting off Ukraine's gas supply if they don't make a pre-payment in 3 or 4 days which Ukraine says they didn't receive the gas from their last payment. What does all of this mean? Escalation for 1, for 2 Ukraine is the pipeline to Europe from Russia. Europe gets 1/3rd of the NG from Russia and cutting off Ukraine means cutting off Europe so there could be even more fireworks there as Ukraine also enters in to HYPER-INFLATION.
In the USO set-up, it looks like we got exactly what we were looking for, a head fake today that hit stops on the EIA petroleum report and a move higher. I put in a half size normal position being a little cautious until I see a bit more as I expected a head fake to be a little longer, but as far as the elements of the trade-set-up go, everything happened exactly as we forecast, USO Follow Up....
This is the bullish closing candle I hoped to see on heavier volume which makes it about 3x more likely that it is an effective reversal candlestick. I'll update USO again tomorrow.
As to the averages, it was a mixed bag with the SPX and NDX closing down while the R2K just barely closed green and the Dow hit a new record high on a gain of +0.08%!!! Seriously? I wouldn't be celebrating that one.
Again today (as all this week) there was no Dominant Price/Volume Relationship, that's usually a little strange, but given these micro moves, I'm not sure I'd trust any relationship any way.
As for sector performance, of the 9 S&P sectors, only 2 closed green; Consumer Discretionary at +.77% and Energy, the laggard was Utilities at -1.64%. As for the 238 Morningstar groups, again a meager 121 of 238 closed green, not the picture of market strength via breadth.
The VIX did close up on a bullish Hammer reversal candle and VXX (Short term VIX futures) also closed up on a bullish hammer with rising volume.
It also closed on a positive divegrence which makes it all the more likely that it's a valid reversal candle (to the upside-the market trades opposite VIX)...
Out leading Pro Sentiment (Leading Indicators) closed down on the day and worse than the averages, in fact seemingly aware of the AAPL decline in the afternoon, take a look...
As for TLT, which we have been calling for an upside reversal (sending yields lower and pressuring the market lower), we have an enormous divergence brewing, I was wrong about a quick intraday TLT pullback...
That really leaves 1 major lever, HYG which is still in line or a little better intraday today, despite the negative 3C divergences. I'd expect treasuries, VIX and HY credit to all signal at the same time, right now we have 2 of 3.
Beyond that, there's not too much to tell as Index futures are nearly perfectly in line intraday at this point. Beyond that, this would not be true. For example, here are multiple timeframes in the various Index Futures, the yellow rectangle is the "Chimney"...
I probably don't need to comment on the above charts.
I'm off to cook, but I will check futures tonight before I turn in as usual.
Have a great night!
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