T3’s Take 3: Apple Shines in Mixed Markets
Interested in a Prop Trading Career? Click here to take our short quiz. 1) Mixed Markets After 3 days of big ups and downs, the S&P 500 stayed stuck in first gear today by falling just -0.1% to 2125.77. However, there was plenty of action below the surface. For example, the Nasdaq Biotech ETF (IBB) rose 1.2% on Allergan’s (AGN) acquisition of Vitae (VTAE). Meanwhile, energy stocks got slammed on a decline in crude oil. We also saw weakness in banks ahead of tomorrow’s big batch of economic numbers. US economic data has been deteriorating since late July, and if the streak continues tomorrow, traders will continue backing off their rate hike bets. Fed Funds futures now imply a 53% chance of a December rate hike, down from 60% last week. 2) Options Traders Go Gaga for Apple Despite the middling broader action, Apple (AAPL) rallied another 3.5% today on continued optimism regarding iPhone 7 sales. However, the big action was was in Apple options. Over 1.4 million Apple call options traded today — over 4 times the 10-day average. And typically, 1.5 Apple calls trade for each put. Today, 2.5 Apple calls traded for each put. It’s safe to say that traders are feeling incredibly optimistic about Apple’s prospects, but beware: the danger of a sell-the-news reaction is growing. 3) Jeff Cooper on HES Just before the close, T3’s Jeff Cooper initiated a short of Hess Corp. (HES), saying the following: We should already be short as HES triggered a Rule of 4 Sell last week. It backtested its 200 day and looks like it’s in a runaway downside move. We are going short here at the market using a 1.50 stop. P.S. Don’t forget to take our prop trading quiz. Thursday’s Trading Calendar US Economics (Time Zone: EDT) 08:30 Empire Manufacturing (Sep): exp. -1, prior -4.21 08:30 Current Account Balance (2Q): exp. -$121.0b, prior -$124.7b 08:30 Retail Sales Advance MoM (Aug): exp. -0.10%, prior 0.00% 08:30 Retail Sales Ex Auto MoM (Aug): exp. 0.20%, prior -0.30% 08:30 Retail Sales Ex Auto and Gas (Aug): exp. 0.30%, prior -0.10% 08:30 Retail Sales Control Group (Aug): exp. 0.40%, prior 0.00% 08:30 Initial Jobless Claims (9/10): exp. 265k, prior 259k 08:30 Continuing Claims (9/3): exp. 2150k, prior 2144k 08:30 PPI Final Demand MoM (Aug): exp. 0.10%, prior -0.40% 08:30 PPI Ex Food and Energy MoM (Aug): exp. 0.10%, prior -0.30% 08:30 PPI Ex Food, Energy, Trade MoM (Aug): exp. 0.10%, prior 0.00% 08:30 PPI Final Demand YoY (Aug): exp. 0.10%, prior -0.20% 08:30 PPI Ex Food and Energy YoY (Aug): exp. 1.00%, prior 0.70% 08:30 PPI Ex Food, Energy, Trade YoY (Aug): prior 0.80% 08:30 Philadelphia Fed Business Outlook (Sep): exp. 1, prior 2 09:15 Industrial Production MoM (Aug): exp. -0.20%, prior 0.70% 09:15 Capacity Utilization (Aug): exp. 75.70%, prior 75.90% 09:15 Manufacturing (SIC) Production (Aug): exp. -0.30%, prior 0.50% 09:45 Bloomberg Consumer Comfort (9/11): prior 44 10:00 Business Inventories (Jul): exp. 0.10%, prior 0.20% 10:30 EIA Natural Gas Storage Change (Sep 9): exp. 55, prior 36 10:30 EIA Working Natural Gas Implied Flow (Sep 9): exp. 55, prior 36 Global Economics 03:30 CHF Libor Rate 04:30 GBP Retail Sales m/m 07:00 GBP Official Bank Rate Earnings Before Open: None of Significance After Close: Oracle Corp (ORCL)
Continue Reading -->Apple Options Breakdown: Traders Can’t Get Enough!
Traders are loving them some Apple (AAPL) today. The stock is ripping up 3.9% on a perfect storm of good news. First, one of the new iPhone 7’s biggest rivals — the Samsung Galaxy Note 7 — has been recalled due to exploding batteries. Yesterday, T-Mobile (TMUS) and Sprint (S) reported huge pre-order numbers, and now there is chatter about strong pre-order activity. Today, CEO Tim Cook appeared on Good Morning America and discussed “augmented reality,” which he believes is more commercially viable than virtual reality. That’s a clear nod towards a major new product category. Plus, the new iPhone 7 and Watch Series 2 are getting very positive reviews. But while the stock is ripping, the real action is in the options. 843K call options have traded today. This is 2.5X the average daily volume over the past 10 days. And it’s not even lunch time yet! The put-call ratio ratio for Apple options today is 0.29. The 10-day average is 0.65. So normally, about 1.5 Apple calls trade for each put. Today, 3.4 calls have traded for each put. We could be setting up one heck of a “sell the news” reaction but for now the ride is pretty nice!
Continue Reading -->Scott Redler’s Morning Call Express: Crossroads!
In today’s Morning Call Express, Scott Redler talks about the action in the SPX and what to look for going into the end of the week. He also talks about high beta tech names as well as key sectors.
Continue Reading -->The Morning Hammer: The Comeback
Crude oil is up fractionally this morning despite a smaller-than-expected drop in crude oil inventories, as reported by the API yesterday after the close. EIA inventory numbers are due at 10:30 a.m. ET. Bloomberg is also reporting that China is boosting crude oil imports due to declining domestic output. It looks like oil traders are cautious heading into the OPEC meeting. It’s clear that chatter about production freezes/cuts has helped oil climb off the lows, but we are seeing lots of conflicting headlines about OPEC’s strategies and there’s no telling what’s going to actually happen. SPX futures are in positively territory after the second big decline in the past three days. The bears definitely drew some blood, and It definitely feels like volatility is back after 51 trading days without a -1% down day. Sentiment is mixed but leaning negative. The CBOE equity put-call ratio was 0.75 yesterday, which isn’t overly bearish. The ISE Sentiment Index was 60 though (60 calls for every 100 puts), which is a sign of tension. The 10 day moving average has moved down to 82.6 which is a sign of growing bearishness. Apple (AAPL) is up this morning on chatter that iPhone 7 chip orders are higher than expected. This is no surprise given that T-Mobile (TMUS) and Sprint (S) both reported strong iPhone 7 pre-orders yesterday. The WSJ issued a negative article on Tesla (TSLA), saying the Model 3 will be hurt by competition from the Chevy Bolt. And yesterday, noted hedge fund manager and short seller called Tesla/Solar City (SCTY) a “walking insolvency.” But yesteday, Schaeffer’s Research reported that Tesla’s 10-day put/call ratio is at an annual, implying that a lot of traders are betting hard against Tesla. That kind of negativity can actually form a cushion because it implies that negativity is priced in. As was rumored yesterday, Bayer agreed to buy Monsanto (MON) for $128/share in cash, up slightly from the last offer of $127.50. Overnight, UK unemployment remained at an 11-year low in July. France’s CPI was in-line with expectations. Thailand left rates unchanged, as expecteed. China’s aggregate financing was 1.47 trillion yuan in August, blowing away the 949 billion consensus. I’d continue to keep it simple. Watch oil, biotech (IBB), and the Russell 2000 for clues. That’s the stuff the bears can use to generate a real scare, so see if they build higher. Good luck out there.
Continue Reading -->T3’s Take 3: Volatility Is Back in a Big Way
T3’s Take 3: Volatility Is Back in a Big Way Interested in becoming a professional prop trader? Click here to fill out our eligibility form. ********* 1) Bulls Give Back Yesterday, the S&P 500 rose 1.5%, the first 1%+ up day since July 8. The bears got their revenge today as the index dropped -1.5% to 2126.78, with the VIX rising 17.7% to 17.85. Market observers were scrambling to find explanations for the sell-off, but for me, the story remains the same: we are seeing a good old-fashioned return of volatility after 2 months of markets going nowhere. Some folks are pointing at deterioration in US economic data – but that’s nothing new. The real question is what’s next? There are no easy answers, but crude oil will be in focus tomorrow given inventory releases today after the close (from the API) and tomorrow morning (from the EIA). 2) Apple Booms on iPhone Sales Chatter Apple (AAPL) was a superstar amid a sea of red, rallying 2.4% to $107.95. Early this morning, T-Mobile (TMUS) Chief Executive Officer John Legere Tweeted that iPhone 7 pre-orders set company records. Sprint (S) CEO Marcelo Claure then jumped into the news flow and added that iPhone pre-orders were nearly 4X higher than last year’s. Consumers appear to be upgrading their iPhone at a faster-than-expected rate, and Apple may also be benefiting from a stumble by a key rival Samsung. Samsung recalled Galaxy Note 7 smartphone due to exploding batteries, which certainly tilts the iPhone vs. Galaxy debate in Apple’s favor. 3) VIX-Plosion Trade Update On August 9, I went long VIX calls, based on my expectation that the VIX could break over 30 within 2 months. We may now be seeing the seeds of such a move, so I don’t have plans to lock in profits just yet. On Friday, we had the first -1% down day in the SPX since June 27. Yesterday, we had the first 1% up day since July 8. And today, the SPX fell -1.5% with the Russell 2000 down -1.9%. The Nasdaq was ‘only’ down -1.1%, but that’s largely because of Apple’s (AAPL) rally. So it looks like the summer snoozefest has officially made way for some autumn excitement. Wednesday’s Trading Calendar US Economics (Time Zone: EDT) 07:00 MBA Mortgage Applications (9/9): prior 0.90% 08:30 Import Price Index MoM (Aug): exp. -0.10%, prior 0.10% 08:30 Import Price Index YoY (Aug): exp. -2.20%, prior -3.70% 10:30 DOE U.S. Crude Oil Inventories (9/9): exp. 4000k, prior -14513k 10:30 DOE Cushing OK Crude Inventory (9/9): exp. -100k, prior -434k 10:30 DOE U.S. Gasoline Inventories (9/9): exp. -1100k, prior -4211k 10:30 DOE U.S. Distillate Inventory (9/9): exp. 1500k, prior 3382k 10:30 DOE U.S. Refinery Utilization (9/9): exp. -0.35%, prior 0.90% 10:30 DOE Crude Oil Implied Demand (9/9): prior 17600 10:30 DOE Gasoline Implied Demand (9/9): prior 10250 10:30 DOE Distillate Implied Demand (9/9): prior 4655.9 Global Economics 04:30 GBP Average Earnings Index 04:30 GBP Claimant Count Change 04:30 GBP Unemployment Rate 18:45 NZD GDP q/q 21:30 AUD Unemployment Rate Earnings Before Open: Cracker Barrel Old Country Store (CBRL) After Close: Apogee Enterprises (APOG)
Continue Reading -->Why I’m Still Cautious About This Market
Yesterday’s big rally came as quite a surprise to just about everyone I talked to. It’s pretty funny how the market likes to confuse as many traders as it can. Yesterday we still had plenty of warning signs to keep us from getting back in. 1) The market couldn’t regain the 50 day moving average and stalled out just below. 2) If the bulls wanted to negate that nasty down day Friday, they needed to get into Friday’s gap, which they couldn’t. 3) Small caps remained much weaker on their bounce attempt, showing beta wasn’t as good of a place to be. All this being said, I am still waiting for SPY to get into the $211-ish range. It got very close on Friday, and I am still holding out for that.
Continue Reading -->How to Lose At Trading Like a Winner
There is no opportunity without risk; thus, learning to truly accept risk is the first step to trading freedom. We teach that once we are in a trade, we employ “trade management” strategies for purposes of taking profits or protective stops. Trading involves speculation, which, by definition, involves risk; therefore, accepting “loss” is a necessary part of trading. Our objective is to help you approach the market in a disciplined, objective manner with a high focus on managing risk (and loss), to help you overcome the tremendous hurdles during your quest to become a profitable self directed trader. A trader refusing to accept loss is as ridiculous as a pilot not accepting turbulence during flight. Any winning strategy necessitates the ability to lose properly. It is the ability to deal with, and “make good” of, one’s losses that enables winning traders to keep a positive mental attitude. It also enables them to progress and effectively maintain their winning ways. Losing properly is not easy and therefore requires great skill. You need to be able to learn from your mistakes. Ask yourself if the trade actually met the criteria of your trading plan. If it did, then could you have averted the loss, or was it a good setup, consistent with your strategies? If it was a trade where an error in judgement was made, make sure you learn from it. The discipline involved with losing properly has to do with taking the loss at the right time. Did you sell at an intelligent time, with your stop placed just beneath support? Or, did you not take your “intelligently” placed stop and sell at a lower price than you should have? Discipline is also necessary when preparing for the potential loss. Make sure that your stop allows for a level of risk that you can stomach, and is compatible with your strategy. This will help you to be comfortable with “losing” properly. Seasoning has a lot to do with maintaining a positive mental attitude. Seasoned traders do not let their losses “get them down.” They understand that the loss may actually be a “friend,” as it creates an opportunity to learn from. They apply the knowledge and use it to improve their trading and maintain a winning attitude while accepting and brushing off the loss.
Continue Reading -->Scott Redler’s Morning Call Express: Hanging By a Fed
In today’s Morning Call Express, T3 Live Chief Strategic Officer Scott Redler breaks down the action in SPX and USO following yesterday’s big up day.
Continue Reading -->The Morning Hammer: Panic Is NOT Here
Throughout August, the market loved hawkish comments from Fed members. But by last Friday, traders had enough. The sold the market hard on Rosengren’s hawkish commentary. And of course on Monday, they bought the market hard on Brainard’s dovish vibes. Not that this is anything new, but the market truly is bizarro-land. Now, traders are pretty much taking a September rate hike off the table. Fed funds futures indicate a 22% implied probability of a September rate increase (down from 30%), while December is basically unchanged at 57%. Crude oil is down this morning after the IEA said oversupply will persist well into 2017. Remember that we have US crude inventory data coming from the API today after the close and from the EIA tomorrow morning. SPX futures are down -0.7% in the early going, which means volatility may really be back. Friday was the first 1% SPX down day since June 27, and Monday was the first 1% up day since July 8. And compared to the July-August snoozefest, a -0.7% move qualifies as real action! Bonds are firming up a little bit, with 10YR bund yields inching back down towards the zero mark. Treasuries are also up a tad. Gold is up as dovish vibes come back, though the volatile gold miners (GDX) are red pre-market. If gold stays strong in the early going, maybe those miners snap back up. Now the real fight begins. The bears failed at every turn for 2 months, but they’re starting to take the lead. And sentiment is still somewhat mixed, which for the bears is good because it implies the market is not braced for serious downside. The CBOE Equity put-call is 1.03, which is bearish but not extremely so. The 3-month VIX spread is +1.98, which is neutral. And the 10-day moving average of the ISE Sentiment Index is 87.4, which is modestly bearish. (87.4 calls for every 100 puts) So traders are spooked, but not freaked out. On a scale of 1-10, with 1 being max bearish and 10 being max bullish, I’d say we’re at a 3. Panic is not here… yet.
Continue Reading -->T3’s Take 3: Biotech, Fed Chatter Rescues Crying Bulls
1) Bulls Fight Back The S&P 500 fell -0.4% to 2119.12 in the early going, which had traders worrying that we’d see a repeat of Friday’s horrendous action. We also saw early weakness in overseas equities, crude oil, bonds, and gold. However, traders very quickly bought the dip, and the S&P finished up 1.5% at 2159.04. This was the first 1% up day in the S&P 500 since July 8. And since Friday was the first -1% down day since June 27, perhaps we are seeing a real return to volatility after 2 months of near-zero movement. 2) Biotech Saves the Day The first clue that the bull was ready to fight back was the early rebound in biotech (IBB), which was supported by 3 pieces of favorable news. First, Horizon Pharma (HZNP) announced it is buying Raptor Pharmaceutical (RPTP) for $800 million. Gilead (GILD) CEO John Milligan also said at an investment conference that the company planned on making regular acquisitions. And finally, Presidential candidate Hillary Clinton fell ill at a 9/11 Memorial Service in New York. Since she is viewed as anti-biotech, anything that hurts her chances of becoming President helps the sector. The Nasdaq Biotech Index (IBB) rose 3.0% to $287.11 today. 3) Fed Schmed This afternoon, Lael Brainard, a voting member of the Federal Open Market Market Committee, gave a highly-anticipated speech in Chicago. Brainard’s speech leaned dovish, making a case for leaving rates as-is. Considering that Brainard is considered to be one of more dovish members of the Fed, this was not a major surprise. However, her speech had a big impact on markets: the US dollar fell, while gold and stocks ripped higher. Traders are also now pricing in a mere 22% of a September rate hike, down from 32% a week ago. Throughout August, traders loved hawkish Fed chatter. It looks like that’s flipped around now. Tuesday’s Trading Calendar US Economics (Time Zone: EDT) 06:00 NFIB Small Business Optimism (Aug): exp. 94.8 , prior 94.6 14:00 Monthly Budget Statement (Aug): exp. -$107.0b , prior -$64.4b Global Economics 03:15 CHF PPI m/m 04:30 GBP CPI y/y 05:00 EUR ECB Pres. Draghi Speaks 05:00 EUR German ZEW Economic Sentiment 18:45 NZD Current Account Earnings Before Open: None of Significance After Close: None of Significance
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