Betting the odds...

I went through a SPX daily scan and anticipated today to be a favorable day for SPX to go down. Why? Take note of the 12 orange circles I marked. Since mid February of '10 where there was a red candle with a very small red bar, the following day was a down day 7 out of 12 occurances. What is interesting is that within the 12 occurances all except two the following day had a significant move either upward or downward. More often than not since May it has been a downward move. Of course the day is not over yet, but with Beige book out and no other major news I would consider today the 12 occurance. Odds favor a big red candle finish for the day. However MACD is trending up, and therefore I think the market overall is still on an upward trend. Not sure if I would bet tomorrow being another down day.

Market Indices Overview

Today at 2pm the market indices are slightly in the red except for the Dow which is hovering with about +20. I put in the three major indices: SPX, NDX, DJX as shown above to illustrate what I think is manipulation in the markets.

At 10am the Consumer Confidence Report came out at 50.4 which was below consensus. However with in a minute of the report the market jump on all three indices by more than 0.5%. Although I will add that also at 10am the State Street Investor Confidence Report (SSIC) came out, and that came in at 96. So maybe investors were buying because of the SSIC number. I do not buy that story though. As the day is progressing the market is slowly lower since the 10am sharp price jump.

Another failed entry.

Pessimism I have, but just timed it wrong. Now I go long and I am wrong again. Presently AAPL is falling and if I had not went long and lost over $210 I would have been short the stock. The blue arrow above is where I sold my call spread for a lost. I had entered into the trade three days in advance and believe AAPL could reach new highs due to the introduction of the new G4 iphone. Not only that but the sentiment for the stock was at an all time high. Clearly I was wrong.

I feel awful to not have seen the drop coming. The day I sold my call spread was the day the stock drop over 2%. The main reason for selling my calls was because I could sence the sentiment for the stock was dwindling.

For instance on the day apple dropped +2% on June 29 there was rumors that Verizon would soon be selling the iphone. There was optimism in the stock because it shot up +$3 in a matter of minutes. Yet within less than 2 hours the stock dropped back to its daily low where it ended at the close. I left my position about an 30 minutes into the close. It seemed to me the instant the price shot up in AAPL was because more of shorts covering than investors buying. When the stock gave back the gain as quickly as it was accumulated it seemed there was not all of upward momentum left in AAPL. Two days later the stock is still decending.

Furthermore the stock market is starting to reach down to the reality of the microeconomy. The downward trend in the general market is spreading like a wildfire throughout all industries. With that also weighting down on AAPL I chose to step out of the stock with a significant loss. Fortunately I did not bet a lot on this trade, spent $410 on the spread but sold it below around $195, which is over 50% loss.

The overall market seem to have found support today with the SP500 dramatic fall paused around 1010 today and ended at 1027+. Tomorrow is the jobs report for June 2010. I am assuming today's close around 1027 was most likely due to shorts covering. One reason is the neutrality in the market. Today's 1027 close versus the market's yesterday closed which was just slightly above 1030 is a +/-3 points on the SP500. In today's market activity this shows no bulls are really going in nor bears puting more shorts. One has to wait until tomorrow's jobs report to consider which side to be on. With such a dramatic fall the past few weeks it does not seem the market has reached a bottom. Yet with such dramatic downward pressure on any given day, the market can dramatically turn also. I will stay clear from trading as much as possible, but its hard to do when I have the itchy fingers. Dang it!