Premarket: Apple is red

apple premarket red 10-4-21From Barron's' "Dow Set to Fall, U.S. Political Pressures Weigh" posted early Monday:

The stock market was under pressure Monday as a host of issues including U.S. political friction and a global energy crunch damped investor sentiment, while a trading halt on Evergrande shares made waves in Hong Kong.

Futures for the Dow Jones Industrial Average indicated an open 80 points lower, after the index rose 482 points Friday to close at 34,326. Futures for the S&P 500 and Nasdaq indicated a similar start to the trading week.

A familiar set of themes weighed on investor sentiment Monday. Analysts noted that the U.S. debt ceiling deadline in December and continuing political conflict over the $1 trillion infrastructure bill and $3.5 trillion reconciliation package muddied the waters.

“Inflation, the energy crisis, supply-chain issues, economic growth stuttering, concern that interest rates could go up sooner rather than later and China’s ongoing Evergrande debt problem remain at the forefront, clouding investment decisions and muddying the waters for anyone trying to make money on the market,” said Russ Mould, an analyst at broker AJ Bell.

My take: Yahoo!Finance sees a bearish Double Moving Average Crossover pattern. Max pain is 145.

NOTE: The current owner of Maximum-Pain.com responded to my queries about how their data are collected...

My charts are updated real time, but the data comes from TD Ameritrade APIs. They don’t update all their data real time. For example option volume is updated real time. But open interest is only updated once per day. They don’t share the exact time in the API documentation. It seems to be overnight. The open interest is updated  by 6 am EST.

9 Comments

  1. Gregg Thurman said:
    I developed a spreadsheet to calculate max pain many years ago. Without API’s it took a lot of work. Eventually I got a calculation that came within ~$1 of published max pain. With each days prints I then charted Max pain movement in relation to AAPL’s movement.

    What I found wasn’t consistent enough to act on. Then, just like today, volatility made max pain a none issue.

    I also found that backing off a Strike, or two, from high Open Interest was more accurate, with less work. This all led me to exclusively track intraday lows, after all, everything else is higher. From that I started buying VCSs about a dollar below Monday’s intraday low. That strategy works great, except (like above) during periods of high volatility.

    1
    October 4, 2021
  2. Adam Stein said:
    The month-long drop in AAPL has little to do with the company’s performance and nothing to do with options max pain. It’s a market freak out about interest rates that’s leading to a deleveraging in tech stocks. Money supply getting sucked out of the market as interest rates go up.

    2
    October 4, 2021
    • Fred Stein said:
      Thanks Adam. Agree. (@ others we’re not related).

      When the current macro turbulence subsides, investors will return to AAPL because it’s an underpriced growth stock, especially at current prices.

      1
      October 4, 2021
      • Adam Stein said:
        Hello fellow Stein!
        Although we both agree about the cause of the current drop, I’m not sure I agree with your conclusion… I don’t know if AAPL is underpriced at current prices or if investors will return. With today’s drop, AAPL is at a 27 PE valuation, which isn’t low compared to recent history. In a higher interest rate environment, the PE was sub 20. Does the stock stabilizes at a 25 PE or a low 20s PE? Even with great Apple EPS growth, a low 20s PE would keep the stock below current levels. For example, if Apple grows earnings to $6.50 per share (from today’s $5.11), a 21 PE would put the price at 136.50.

        0
        October 4, 2021

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