The “macro” landscape behind this market is confusing me.
You would think when emerging markets see enough risk, it would lead to some kind of selling in domestic markets.
Right now, the Turkish Lira is getting clobbered. The South African Rand crashed. The Argentine Peso crashed. We’re starting to see more spillover in other currencies.
The bearish view here is that dollar strength is a direct result of central bank tightening, and it will eventually matter to the markets.
That’s the disconnect I see. Emerging market volatility is continuing to ratchet higher, while SPX vol is near its 6 month lows.
This could be nothing. It could be my own bias of wanting the market to pullback so I can get better entries. I’m not expecting a 1997 EM crisis or anything.
Over the past few days, the market has pulled in a tiny bit, but it really isn’t much. Underneath the surface there has been rotation. AAPL has gone absolutely bananas, and I want to fade that here.
As for the overall market, I think we’re due for a pull in. There’s a gap on the S&P at 2875 that is begging to be filled.
Trade #1: AAPL
This is a parabolic short. The stock has 3 days in a row above its upper bollinger band, and it’s currently 13% above it’s 50 day moving average… that doesn’t happen very often. I like scaling into call spread sales at these prices.
Expected Price: 227
Sell to Open AAPL Oct 245/250 Call Spread
Tier 1: Enter at 0.60, Exit at 0.10
Tier 2: Enter at 0.90, Exit at 0.40
Tier 3: Enter at 1.20, Exit at 0.70
Trade #2: LULU
This is a Post Earnings Announcement Drift setup, where we expect the stock to stay bid for the next few weeks.
Expected Price: 158.70
Sell to Open LULU Oct 145/140 Put Spread
Tier 1: Enter at 0.70, Exit at 0.20
Tier 2: Enter at 1.00, Exit at 0.50
Tier 3: Enter at 1.30, Exit at 0.80