{"id":39318,"date":"2017-05-11T22:01:11","date_gmt":"2017-05-12T05:01:11","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=39318"},"modified":"2017-05-11T22:01:11","modified_gmt":"2017-05-12T05:01:11","slug":"t2108-update-170511","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2017\/05\/11\/t2108-update-170511\/","title":{"rendered":"Above the 40 (May 11, 2017) – S&P 500 Snaps Back As SNAP, Well, Snapped"},"content":{"rendered":"

AT40<\/strong> = 49.1% of stocks are trading above their respective 40-day moving averages (DMAs)
\nAT200<\/strong> = 57.2% of stocks are trading above their respective 200DMAs
\nVIX<\/strong> = 10.6 (volatility index)
\nShort-term Trading Call<\/strong>: bullish<\/p>\n

Commentary<\/strong>
\nThe week started with the volatility index, the VIX, plunging to a 14-year low. I held onto my put options on ProShares Ultra VIX Short-Term Futures (UVXY) but did not get the opportunity to extend profits. The VIX recovered each of the next 3 days from there and even returned to the high of the recent range. Stock buyers took over at that point from weak sellers and helped the S&P 500 (SPY) snap back. Today’s trading action picked the index off the bottom of the last trading range to a close that lay flat with the open.<\/p>\n


\n
\"The<\/a>
The volatility index, the VIX, struggles to recover from starting to week at a 14-year low.<\/figcaption><\/figure><\/p>\n

\"Sellers<\/a>
Sellers failed to hold the S&P 500 (SPY) down and buyers closed out the day flat with the open.<\/figcaption><\/figure>
\n<\/center><\/p>\n

AT40 (T2108), the percentage of stocks trading above their respective 40DMAs, still closed with a notable loss from 54.0% to 49.1%. At its lowest, AT40 traded at 44.7%. The action in AT200 (T2107), the percentage of stocks trading above their respective 200DMAs, was much more troubling. AT200 closed at 57.2% with its lowest point marking its third lowest point since it broke down in March. While the S&P 500 can continue skirting a bearish divergence with a non-cooperative AT40, the weakening AT200 bodes poorly for longer-term prospects of the stock market. As always, I am interpreting one step at a time. <\/p>\n

Intel (INTC) is one of the big caps causing a bit of a drag on the major indices. After INTC suffered a post-earnings gap down, I loaded up on call options<\/a> as a part of my “between earnings” strategy for INTC. I assumed converged support at the 50 and 200DMAs would hold, and they did hold long enough for me to capture a double. However, the recovery was short-lived; it did not quite reverse post-earnings losses. Today, INTC broke down through support and closed at a new post-earnings low. I will be looking to relaunch the between earnings trade in the next few trading days.<\/p>\n


\n
\"Intel<\/a>
Intel (INTC) cracked its 50DMA support again as its post-earnings recovery proved short-lived.<\/figcaption><\/figure>
\n<\/center><\/p>\n

The true goat of the day was Snap, Inc. (SNAP). The young company’s first earnings report as a publicly-traded company snapped shares by 21.5%. Such a snap back to reality was easy to accomplish given the stock’s sky-high valuation and hype to match. I have written many times here about my bearish overall assessment of SNAP and my various trades<\/a>. The stock’s post-earnings collapse provided validation and confirmation. The next test is here with the stock hovering above its $17 IPO price tag.<\/p>\n


\n
\"Earnings<\/a>
Earnings for Snap, Inc. (SNAP) drove a new all-time low. The high of the day stopped just short of the previous intraday all-time low (imagine that!).<\/figcaption><\/figure>
\n<\/center><\/p>\n

I covered my short position in after-hours trading as SNAP bounced off its $17 IPO price. There should be no surprise that sellers dried up at that point. I imagine investors and traders who landed the IPO are loathe to sell into a panic for a loss, but they were likely rushing to lock in whatever profits they had left. I was impressed that SNAP managed to open as high as it did ($17.96). I did not think to short again as SNAP reached the former intraday all-time low. The picture-perfect retreat from that technical level reminded me why trading SNAP has been so attractive. I am once again long SNAP and looking to add a last tranche of shares closer to the IPO price…assuming that level will hold for a while. SNAP issued 200M shares and 132M shares traded today, so it is very possible that the market has not yet washed out IPO-related sellers. The next big event will be the window insiders get to dump stock into the market. If SNAP’s massive stock-based compensation<\/a> is any indication, insiders will be dumping as fast as the winds allow.<\/p>\n

The analyst reaction to the calamity was interestingly varied. The mix bodes well for on-going opportunities to go long and short the stock. I culled this list from reporting in briefing.com. If the analyst made a rating or price target change, I noted it. I placed an asterisk next to underwriters. <\/p>\n