Once again, the indexes traded mixed. This time however, it was the NASDAQ that had the strong showing, while the Dow slid and SPX traded flat. The NASDAQ traded above 3,200 for the first time in 12 years, but was unable to close above it. That is a round number I am focusing on moving forward: 3,200. Elsewhere, GLD is on verge of a big breakdown, AAPL gives a clear set up, and the VIX looks like it may have rallied for no reason again.
- GLD looks scary — GLD closed below $160 back-to-back days for the fist time all year Mon/Tues and today it settled at a year-to-date closing low
- AAPL is this easy — Below today’s low and expect big downside, above todays high and expect big upside
- What’s the VIX doing? — The VIX rallied over 2.75% but we didn’t see a correlated move lower in SPX, or a wide daily range compared to last week
On Monday GLD gave its first warning sign that the channel it has traded in all year was on the verge of resolving itself with a breakdown lower. By now that warning sign is all but confirmed. GLD closed at its lowest level of the year today and if last week is any indicator, you can expect more red Thursday and Friday. If there is a bounce though, it won’t mean much if it can’t recapture the $161.20 level with authority. Volatility in GLD has been very low which means option premiums are cheap. Now is a good time to start looking at outdated puts on GLD (I believe a trip to $150 is in play by end of March) if you haven’t done so already.
AAPL traded its lowest volume and tightest daily range of February today. This is an early sign of indecision as traders likely wait for the price to reveal its next directional move. This is a simple play in my eyes, if today’s low of $463.22 breaks then the rally off of $435 is going to start looking very vulnerable. If today’s high of $473.64 breaks, then that same rally likely has more left in the tank. Preliminary targets on each scenario would be $450 and $490 assuming first that $460 support breaks and $475 resistance breaks thereafter.
In the “something we’ve seen too many times this year” category, we have the VIX, which rallied even though the S&P500 traded flat. Moreover, today’s range of less than 9 remains isn’t what I call a wide daily range on the day. As a result, I view this move back near 13 as contrarian bullish. Even better for the bulls was the VIX’s inability to settle above 13, meaning it could be a level that is becoming resistance. If the VIX’s move higher today is to be justified, the daily ranges on SPX will again start exceeding 10 points, otherwise this is just paving the way for another test of 1,525.
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