Apple, Market Technical Analysis - Battle for the 200

In order for this market to advance, the Bulls need to take control from the Bears by advancing both Nasdaq and the S&P 500 above their respective 200 day moving averages. This is historically the line of demarcation. When markets rise too quickly, they often fail at the 200. This time, it looked as the we might have a better shot.

The Naz had already captured the 200 day moving average last week, which was at 2417. And now it was time for the S&P 500 to follow suit and take control of its 200 DMA at 1327. And the S&P 500 made a valiant effort going into mid session, advancing all the way to 1440. The Bulls look like they had finally seized control of both markets.

Apple (AAPL) on the other hand was showing some weakness, advancing early then retreating. AAPL and the entire tech sector showed overall weakness, nothing specific, just profit taking after a good run up. AAPL finally got into sync with the indexes and topped out at nearly 189. But the Bears wouldn't be such push overs. The combination of overbought conditions and negative divergences on the 60 minute charts was too much to overcome.

Then the trading programs kicked in selling was triggered. Both indexes pulled back to just a sliver under their respective 200 DMAs nearly unchanged, the Naz settling at 2516.09 -12.46 (0.50%) and the S&P remaining above its previous close to 1426.63 +1.46 (0.09%). Apple's weakness on the other hand, magnified the pullback, and ended down at 183.60 -4.02 (2.14%).

The Bulls aren't done by any means. One would think if this market were in trouble, it would have failed badly. But that wasn't the case. Besides, it's normal for markets, after a good run, to lose some steam at the 200s. The longer term charts provide a rosier picture where bullish patterns are forming, suggesting the markets will move much higher. But first they need a little more selling, which would help reset the oscillators, provide a bit more consolidation and recharge the effort to move through the 200s with force, and put the Bears into hibernation.

The market internals provide supporting evidence that this move down was not so bad. For example there were far more new highs than lows on the NYSE, and more and more stocks are putting in new highs since this uptrend started several weeks ago. The other tell is that the volume of the selloff today was much less than the volume during the advances last week.

So if the selling continues, we need to take notice of what the support levels are below each market. If we violate those levels, then the story changes, and the 200s become much more difficult to breach. Look for support at the 200 and 50 day exponential moving averages (EMA). For AAPL, price support is in the 182-183 range.

Update, Support Levels: Tuesday, May 20 @ 10:46 AM

I wanted to note some support levels that traders should keep in mind as they navigate the markets over the next couple of days seeking out opportunities to take positions.

The S&P 500 has support at the up trend line at 1405, and it also has the 200 day EMA at 1407. If we fall below that, there's the 50 day EMA at 1383. The Naz 200 day EMA is at 2459 and the 50 day EMA at 2412.

The Dow 200 day EMA is at 12816 and the 50 day EMA at 12721. I don't particularly favor sighting the Dow, as it has less relevance to AAPL than the Naz and S&P 500.

Keep these levels in mind when considering a position. If we bounce off these levels, that may present an opportunity to take a position. But don't go wild here, I believe there's still some selling left in this market.

-zach