T2108 Status: 61.5%
VIX Status: 12.4%
General (Short-term) Trading Call: Hold (Bullish)
Active T2108 periods: Day #301 over 20% (includes day #280 at 20.01%), Day #15 over 40%, Day #13 over 50% (overperiod), Day #40 under 60%, Day #41 under 70%
Commentary
Post-summer trading is still crawling along but excitement continues to roil under the covers. This T2108 is more of a quick chart update given T2108, the S&P 500 (SPDR S&P 500 (ARCA:SPY)), and the VIX all barely budged. The S&P 500 actually managed a fresh intra-day all-time high before fading back toward 2000. It remains in a bullish zone.
However, the story starts to get more complicated as soon as I turn the lens to Apple (NASDAQ:AAPL). Over the weekend, I updated my sentiment analysis on AAPL and concluded with four points of caution. I did not have a specific day or time for a pullback, but I sure did not imagine one so sharp, sudden, and deep all in one day and well in advance of the September 9th product announcement!
A massive and sudden rejection of AAPL from all-time highs
As much as I like Apple, this selling has to be taken seriously no matter the reason. It was an outsized loss at -4.2% that occurred on heavier than usual trading volume. Buyers have a major hurdle to overcome here, and now the bar is REALLY high for AAPL’s product announcement to dazzle and amaze. I purely speculated on a relief bounce by buying up some call options. I am looking for a move at least back toward $100 for this week and a late run-up into September 9th next week. I also bought put options that I flipped very quickly into the selling. I did not use the Apple Trading Model (ATM) for these trades. The ATM is predicting very high odds of follow-through selling for Thursday, so it is very possible I attempt to flip put options again after the open. (The model was invalid for Wednesday given the Monday holiday).
Of course it is far too early to weep over Apple. A steady 50DMA and even stronger 200DMA await below to provide support if needed. If the (near-term) bullish thesis remains intact, Apple will more drift toward support levels rather than plunge into them.
The plunge in Apple (AAPL) was enough to punch a potentially ominous bearish engulfing pattern into the NASDAQ (QQQ), creating a kind of double-trouble for tech. Since the index found support at the bottom of its uptrending trading channel, I am NOT calling a top or changing my trading signal to short. But another close in the red will have me raising a red flag. I just wish T2108 were in overbought territory to make a bearish call easier. After all, the trading action on Tuesday had me convinced that the indices still have a lot more upside immediately ahead.
A bearish engulfing pattern shows up on the NASDAQ – the first potentially bearish signal in a month
To round out the red side of the ledger, Splunk (NASDAQ:SPLK) faded hard on the day, a loss of 4.9% that was as high as 6.5% or so. THIS is the kind of move I expect when a stock runs up so far above its upper-Bollinger Band® (BB). Note well how neatly the stock bounced off that upper-BB. While I was supposed to be stopped out of my short position as I attempted a fade a day early, I think the lesson here is to perhaps pace out fades of particularly strong bursts above the upper-BB.
The big fade of over-extended Bollinger Band conditions came one day later than expected
On the more bullish side, Baidu (NASDAQ:BIDU) followed-through as I expected from Tuesday’s impressive breakout from a BB-squeeze. Note how BIDU failed to hold the highs after extending well above the upper-BB. Regardless, I was definitely left wishing my limit order to sell my BIDU calls had gone unheeded on Tuesday.
Baidu (BIDU) buying follows through but quickly stalls as it extends above the upper-BB again
Finally, Monster Beverage Corporation (NASDAQ:MNST) is following through almost exactly as I had hoped when I posted about the trade setup on August 25th. As soon as MNST manages to trade on the other side of the first BB, I think its upward momentum should really take off.
Monster Beverage Corporation (MNST) ends its post-deal slide right at the anticipated spot, but it has not yet traded above the desired trendline
Daily T2108 vs the S&P 500
Black line: T2108 (measured on the right); Green line: S&P 500 (for comparative purposes)
Red line: T2108 Overbought (70%); Blue line: T2108 Oversold (20%)
Weekly T2108
Be careful out there!
Full disclosure: Long AAPL call options, long MNST call options, short SPLK