Bulls try to move cautiously forward Wednesday, but a bite out of Apple turns investors sour. As of 1:00 ET and after the lunchtime hour, bulls in the SP-500 (SPY) are feeling some indigestion pains to the tune of 0.30% and more, less subtle signs a move higher is going to need some type of "other" fuel to sustain the effort.
Following Tuesday’s final thirty minute curtain call by bulls in an Apple Dumpling Gang (AAPL) production and one which muscled the broader market back from the brink of real profit-taking to much narrower losses of just 0.09%; it’s all about the market’s No. 1 weighted stock once more, but this time to the chagrin of those getting caught up in the chase.
Shares of gadget goliath Apple, roughly 4% of the SP-500’s weighting and counting, are off a very modest 0.15% but some 3% off its intraday highs of $526.29. Technically speaking, the stock is putting together a bearish engulfing hangman. On the heels of gains of 15% in February alone, not to mention (but we will anyway) 44% since its December lows; we’d surmise the real wakeup call for investors isn’t coffee, but an extended and overbought ticker sporting the letters AAPL.
In those other influential, but less-so these days, markets of notice, the EUR/USD is off 0.75% and continuing its charge towards a challenge of key support at 1.30. The past couple sessions of weakness in the currency pair has been met by a disconnect from equity bulls as other bullish catalysts post-package Greece and the fore-mentioned Apple, made for a nice diet for whetted risk appetites.
The precarious and still largely ignored action in the EUR/USD comes in the face of a vague Chinese official’s pledge it may assist Europe through the central bank and its sovereign bailout fund. More interesting, the buzz has been used as a support by equity bulls both abroad and stateside.
And the VIX ($VIX) is up a rather suspicious 9.0%. At 21.25% and roughly 13% above its mean-reverting 10SMA, the interpretation is the action represents a more rare warning of profit-taking in the broader market to (still) come, rather than a situation fast closing on an overly-fearful pullback opportunity for bulls.
On the officially-sanctioned economic side, the Eurozone saw a decline of 0.3% in its Q4 GDP. Germany showed a dip of 0.2%, while France managed an increase of 0.2%. While two out of three look to cause alarms to sound off on credit markets suffocating economic growth, results from the region’s two most influential economies, did top forecasts.
Stateside, it’s been a trifecta of sorts for bulls. Regional manufacturing via New York’s Empire Survey proved stronger-than-expected. For February, the gauge rose to 19.5 from January’s 13.5 and above Street views of 14.0. Separately, industrial production came in at 1.0% compared to estimates of 0.6% and the Housing Market Index increased to 29 from 25 and above forecasts of 26.
Finally and in those sometimes accurate heat-seeking option markets, bulls are still feeding on a wounded Deere (DE) of sorts. Shares of DE are off 3.25% and hemorrhaging below 10SMA support on the heels or umm, hoofs of its mixed earnings report. However, as a good deal of Wednesday’s 2-to-1 option activity in favor of the calls appears to be of the closing variety in both February and March out-of-the money strikes; I can’t say I blame those efforts either.
Chris Tyler
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
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