Get More Bearish After Apple – Wait For Technical Weakness – Buy Puts

April 23, 2015
Author: Peter Stolcers, Founder of OneOption

If you want to see what I'm trading today - take the FREE TRIAL Posted 9:50 AM ET - Yesterday, the market pushed higher and it tested resistance at SPY $210. We are within striking distance of the all-time high and the headwinds are stiff. Mega cap tech stocks are starting to announce and once this wave of reporting runs its course, the bid should weaken. Facebook posted yesterday and the reaction has been muted. Microsoft and Google will post after the close today and Apple will post after the close Monday. Many industrials posted this morning and in general, stocks retreated after the news. Analysts often focus on the "beat", but the real story lies in the year-over-year comparisons. Earnings estimates have been lowered so most companies should be able to exceed estimates. Unfortunately, the year-over-year increase is at the lowest level in years. Stocks are trading at a rich forward P/E's are at 18 and there is some “fluff”. Flash PMI's in China were weaker than expected (49.2). This is the weakest reading in one year. Europe also missed expectations (53.5 versus 54.4). Central banks are printing money like mad and they can't stimulate economic growth. The focus is on a stupid little quarter-point rate hike in the US and it should be on deteriorating global economic conditions. Durable goods orders will be posted tomorrow. This is a volatile number and either way it won't have a lasting impact. The bigger number will come next week when Q1 GDP is posted. Many analysts feel that growth will come in at a meager 1%. Once Apple is out-of-the-way, I can buy puts with a little more confidence. I am not in the practice of picking market tops and I need to see signs of weakness before I scale in. I would like to see late day selling and a breakdown below SPY $209. The market is close to the 100-day moving average. Because we have been trapped in this trading range, it continues to creep closer to the current price level. It will be tested with greater frequency and I can get more aggressive with my put purchases once we are below the 100-day moving average. Greece will need major funding over the next couple of months and it could add fuel to the decline. The rhetoric has been heated and they are not helping their own cause. On a longer-term basis, I believe credit risk is contained and Grexit could be bullish for European markets once the dust settles. I'm not looking for a massive market decline, just a move to the lower end of the range. May is a seasonally weak period and given all of the influences, we should see some profit-taking. Don't jump the gun. Wait for technical support to fail and be ready to buy puts. If the market continues to rally, stay sidelined. The chances of a sustained rally are slim given the backdrop. If you want to see what I'm trading, take the free trial or sign up for 10 symbols. . . .image

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