Tuesday Market Recap – 8/4/15

It was another trading session where it felt like the market hung in the balance and one push was going to send it into a free fall.  Yet somehow the market was able to hang on.

Will tomorrow be the day it finally slips?  Or is the resiliency a sign of a market that just won't quit?  One that we've grown accustomed to since the March 2009 lows of defying each and every call for a sharp correction.

It was, as CNBC put it, 'a mildly lower session'.   Those mildy mild trading sessions.  Not enough spice to break a sweat, but you still don't want to spill any of it on your shirt.

Yes and the $AAPL plunge.  That collapse of the largest company in the world by market cap that everyone saw coming.  It's market cap has dropped by about as much as the billions the company is spending on buying back it's own stock.  Amid the wreckage of this pull back, is the corporate share buyback machine likely scooping up shares at a discount to previous prices.  Silent amid the carnage is all the analysts who've been quick to upgrade the stock in 2015.  You know, the same ones who were downgrading the stock precisely at the lows in May of 2013.

I've been pretty adamant through the years about a move to record highs.  And despite this recent pull back, I still think $AAPL will do just that.  But it's tough to look at the action the first two days of August and think that $AAPL will recover from this pull back.

However it's tough to put a positive spin on the stock from a technical perspective.  The stock has left broken support in its wake, and absent a swift and sudden reversal the obvious resolution to the recent sell-off is more weakness.

On a shorter time frame the selling is getting overdone.  A more recent pull back of lesser scale saw a swift a gratuitous recovery for the bulls.  This sell-off has been more dramatic and perhaps it will illicit and even more dramatic price recovery.  I'm not sure anyone is calling for that right now.

Today's Option Action Recap

The $SPY continues to confound and astound in 2015.  It's had a tough time breaking out and breaking down.  Current action remains muted.  The market has been in its tightest range since the Industrial Revolution.  I find it comforting though that the market remains resilient in the face of the $AAPL, energy, Greece, China and precious metal carnage.  I also find the action this week is reacting well to support.  That continues to bolster my bullish bias for the market into September.

The S&P500 futures inverted head and shoulder pattern remains in play.  While I wish it would breakout already, you can see what a little downside is doing to the bears.  They are drooling again.  DROOLING.  The RED candles are being drawn.  The plans being made for a correction, just as they were every few months since the lows in March 2009.  And if the history of the last 6 years is any indication they will go back to talking about baseball and how miserable everyone in this world is because we aren't as smart as them.  If trading with the trend is dumb, I'm about as dumb as they come.  And until that trend breaks...  you get the point.

Bonds are pulling back.  I talked yesterday about what this market needed to rally.  3 out of 6 is pretty good for a baseball player, but it didn't work out for the market.  Even 5 out of 6 would have worked.  We just didn't get it done today:

The above remains true for tomorrow.  The energy rout needs to come to a halt.  The US Dollar needs to pull back.  Bonds need to ease up.  $AAPL needs to reverse higher.....  let's see if we get it tomorrow.

After the bell we have $DIS dropping and $Z popping.   $DIS puts were something I got into yesterday the $120 strike at $1.07.  $Z options, on the other hand, were looking for an $8 move.  The options were asking a lot, and while they gave it up on the calls side, with $Z moving $10, the risk was substantial.  For those who entered for the move, I salute you.

Earnings continue this week with $GMCR, $PCLN and more, which I covered in a post this weekend.

and finally the VIX.  Since 2009 the VIX is like that poor kid no one wanted to invite to their birthday party when they were younger.  Of course that nerd is rich as hell right now partying with a bevy of woman half his age.  But at the time, you didn't want to be near that kid.  That's the VIX in this market place.  It gets beaten down far too often.  It gets bad mouthed all too frequently.  And you know what?  It deserves it.  Well maybe not.  But for some reason it felt pretty good writing that.  Maybe I'm a bully.  Or maybe I just want to sound like a bully?  Or maybe whether or not I'm a bully is completely irrelevant to where the VIX is headed?  Or maybe it is.... I think I just blew my own mind.......anyway...

It's setting up here.  And from a historical perspective it's not going to the movies.... again.  No bowling party.  No Party Palace.  It's going to get left behind.  And the implications are upside for the stock market.

Fear not you nerdy VIX.  Your sorrow and pain will be paid back ten fold when you graduate college and make your first million.  Of course by then inflation will have turned the US Dollar into a Zimbabwean muscrat  or whatever they call it, and those million dollars from your first paycheck will get you a loaf of bread and some marshmellow fluff,  but all your jock classmates will be poor and broke by then, so you've got that going for you.... which is nice.


Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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