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October 23, 2012 / redman59

Statistical Thoughts on Today and Trade Updates in $AAPL and $GOOG

Today we saw a gap down of greater than 1% as measured by the $SPY.  In recent occurrences it tends to mark close to a low and a bounce ensues and as I write this the $ES_F is +5 pts.  On the daily 1 year chart below of the $SPY the yellow arrows mark days where the $SPY gapped down greater than 1% and the lines consisting of the 50 SMA (blue), 100 EMA (red), and 200 SMA (purple):

So what do I expect from here?  For some reason  I do not believe we saw the low and I think today’s low gets taken out.  Ideally we see a gap down and this flushes some out and in my opinion that would be the dip to add some or more to your longs.  Today was really a boring day as the bulk of the move occurred overnight and most of the $ES_F intraday action was in a 8 point range.  I do think that this created some panic based on a close over close basis but many are programmed to buy the dip.  This is why I think a gap down would create some frustration causing further panic and making those that bought or added today to cut their losses.

One thing I found interesting is that a short-term overbought/oversold indicator I watch on indices and stocks has triggered recently and this does not trigger often on the indices but has recently intraday.  This does a pretty good job and marking turning points and I watch this on an hourly chart.  Below you can see a 90-day hourly chart for the $SPY with yellow arrows marking the signals and a plot at the 141 level to show how critical it is to hold:

With this I expect some further downside, on a time-basis I am not sure but I expect the downside sooner rather than later followed by continued upside.  I have 2 positions on right now in $AAPL and $GOOG and I made adjustments to both.  In $AAPL I rolled down the call side but messed up the order as I wanted to roll the 660/670 calls to the 650/640 calls but instead rolled with an Iron Condor and I forgot to change it to all calls and instead closed out the calls and rolled to 650/640 puts but the risk profile remains the same; just not what I wanted and a mistake noted for my journal, the order entries can be found below as with the risk profile on a 1-contract basis:

The $GOOG trade had me watching the 680 level as we had an awesome day despite market weakness and I raised my closing stop to below 680. $GOOG saw mild basing throughout the day and in the end of the day I decided to go more neutral to the 670/6555 Weekly Bull Put Spread I had on and then entered into the 695/710 Bear Call Spread effectively making this a 655/670/695/710 Iron Condor max risk $990:

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