Guest post by Vix and more.
If a picture is worth a thousand words, then perhaps I can save quite a few keystrokes and maybe even a few tweets with the compendium below.
This is a visual post, so I will keep my comments brief, except to note that the graphics below originate from LivevolPro.com and provide a graphical history of Apple (AAPL) earnings from July 2010 to the present.
Each column represents one earnings reporting cycle and includes three charts and four earnings periods:
- Top candlestick chart shows eleven days of AAPL stock prices, with five days before and after the earnings report
- Middle chart shows the prices of straddles in the front month and second month for AAPL options (useful for determining the degree to which investors under or overestimated the post-earnings price move)
- Bottom chart shows 30-day implied volatility derived from the front month and second month AAPL options (similar to what is now available from VXAPL)
Remember that you don’t have to have an option about Apple’s earnings report, but since everyone else does and the markets have one priced in, it may be helpful to put the current situation into historical context.
Time for a review of the European dog’s charts. This is what we wrote on March the 28th;
We clearly see how several European indices all show the same pattern. The Bernanke rally has faded, and we marked a short term top. What is interesting, is the fact that we never even tried pushing the previous highs. This is the same psychology when we topped out over the previous tops. Did Bernanke fool the last momos covering their shorts, and more new “smart” longs entered the fake move?
One thing is sure, Spain’s Ibex is trading very badly, and we strongly believe Spain will become the next major point of focus.
The European indices have pretty much collapsed since then. We might get a short term bounce, but the dogs, Spain and Italy are looking at taking out new lows.
The events of March seemed to confirm that 2012 will be a much less nerve-racking year than investors have had to endure in the recent path. That doesn’t mean the advance has been free from anxiety: debate about whether the stock market rebound in the United States may have outpaced the recovery in the underlying economy increased steadily as the month progressed, while unease about the health of the European financial system remains a constant. In the following series of charts, we hope you’ll find additional insight into what has already taken place, and contribute to your analysis as the second quarter kicks off this week. All charts here.
After the initial rally (we still can’t figure out why), all futures have traded down, and are now at intra day support levels. News of how the Eurozone will be saved is getting more pathetic by the day. Politicians can’t agree on anything, this should be clear to everybody. Everything is still moving on light volume, although the sell offs show increasing vomlumes. Let’s see if we will start flirting with the levels post the central banks intervention some days ago. We would love to see how the market breaths “down there”. Chart below;
Some quick charts before Europe closes. With margin calls and hedge fund momos selling today, market rebounded, and the set up for a big rally could be here. While people sold off stuff in a “slow” Algo Panic, we might just have hit the bottom, at least short term. Despite us being bearish, today’s nice reversal has shaken out weak hands, attracted new “Europe is going bust shorts”. Time for the new shorts to feel the pain on the upside. Some European reversal charts below. Stoxx, MIB, IBEX.