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Apple in a Dangerous Position; Bears Are Watching


Chasing big up opens in a bear phase is as dangerous as shorting big down opens in a bull phase.

Editor's Note: The following is a free edition of Jeff Cooper's Daily Market Report. For a two-week FREE trial of his daily commentary and nightly day and swing trading picks, click here.

And you snatch your last rattling breaths
With deep-sea-diver sounds,
And the flowers bloom like madness in the spring
-- "Aqualung" (Jethro Tull)

My rule of thumb is to sell up-spikes in bear markets -- especially near logical resistance and especially on an up opening and first hour high (and vice versa in bull markets).

Chasing big up opens in a bear phase is as dangerous as shorting big down opens in a bull phase.

Note how Thursday's open carved out a bearish backtest of a short-term Live Angle from the beginning of the week.

When the SPY broke back below Wednesday's late breakdown pivot (the broken double bottom on the 10-min chart), the market bucked on Thursday. The break coincided with losing our key 1168 S&P level.

Thursday's late squeeze into the run-off played out when the SPY stabbed back up through Wednesday's low.

Note the Reversal of a Reversal on Thursday's 10-min S&P. There were two outside down 10-min bars at/near yesterday's lows followed by an outside up bar that offset/exceeded the high of the low bar on the day.

The reversal saw the S&P run up to the low of the midday break bar (labeled 'break').

We sent an alert prior to the bell to 'trade shorts with the shorts at/near the close.' That means that as the shorts are getting squeezed and buying back, I was going to sell into their purchases of SDS (or various individual stocks).

This morning with the futes right back down near Thursday's lows, the SDS is up 60 cents from the close as I write the report.

Tech was liquidated with conviction led by Apple (AAPL).

Stabbing back below its prior peak at 400, AAPL is in a dangerous position and could lead the S&P below 1100.

AAPL is perched on a rising trendline from the June low that coincides with its 50 day moving average.

The 50 dma has been tested and held four times since the early August low in the market.

AAPL is also hanging by a thread at a shorter term 3-point trendline up from that August low as well.

A break below 385 with authority today puts AAPL in a vulnerable position. Closing below this rising trendline and its 50 dma on the important Friday weekly closing basis would likely confirm a bull market high in the stock.

In the last week we showed the following chart/Square of 9 Wheel that suggested a top in AAPL was playing out.

Click to enlarge

AAPL bears are watching.

Below we walk through two of our short day picks for Thursday, IPG Photonics (IPGP) and Ulta Salons (ULTA).

Note how IPGP gapped up above a mini declining trendline before triggering an ORB (on a break of the opening range, defined by the high/low of the first 30 mins of trade). This is what I refer to as a Catapult ORB.

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Positiion in SDS, EUO, PSMT.

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