Supplyside
APPLE: BULLISH VOL CROSS AND SUPPLY SIDE; BUT DEMAND DEFICIENCYVolume
Apple Volume traded up for the first time in 4 days on thursday, increasing 25% from 20m to 26m, whilst this may be considered bearish - as increased selling, it is important to not 26m is still 35%-40% below the 4wk and 6month average.
Volume cannot fall forever and we have been trading at extremely low volumes all week, so given these facts, a modest rise from 20m-26m is still bullish IMO given that apple traded at 46m last week, so even at 26m now we are still significantly depressed on the supply side - though the demand deficient problem of the recent times remained rife in the stock yesterday, where the stock fails to attract new liquidity, which is all the stock needs to ask the price up given the perfect, low supply environment apple is currently in.
Historical and Implied Vols
We continue to have a bullish view from a vols perspective as implied traded flat yesterday, up only 10bps at 21.02.
Also, a bullish cross pattern emerged between HV and IV, where HV is crossing lower then IV.
The shorter period 5/10 HVs are already trading below IV, but yesterday the 20/30 period HV also made a bid to make a move below IV in the coming days.
As i have highlighted from the last bull cycle on the graph, when the 4 HVs traded bid and started falling (to eventually trade below IV), Apples price was bullish, rising over 10usd, such interactions between HV and IV is historically highly correlated bullish behaviour. In april as you can see it was Earnings uncertainty that caused the relationship to unnaturally break down - in previous bulls, the HV < IV has allowed bull runs to continue for several months before.
Vol correlation with apples price also traded flat remained above the -90% and maintaining my bullish view with the indicator.
Evaluation
Much of same from apple, where we are witnessing a perfect "bull run" environment (low all round vols, low volume, low price) but the demand side remains the issue - likely due to apples poor mirco-econ environment of poor confidence/ fear regarding their future performance and the ever looming July Earnings, which is artificially keeping demand low for apple.
I dont expect any significant upside today from apple, given fridays are normally the worst day for stocks due to the "end of week" sell-off that occurs as some money managers cannot hold open risk on their books over the weekend.
IMO i expect apple to close 99.2, higher if we are lucky.
If we dont have a bull run soon, we may not see one until august, given that i expect apples price to trade low/ down in the 3 weeks before earnings as investors remember Aprils tragic sell-off and try to avoid a similar event (even if it is unlikely).
