Apple Technical Analysis - Fed, Oil, and Fear

The Fed painted an ugly picture for the economy today, cutting growth estimates, and basically telling the markets that the rate cut cycle is over. The market sold off on the news, with the Dow down almost 250 points before rebounding a bit and ending at 12,601.19, down 227.49 (-1.77%). We got a double whammy with oil spiking nearly $4 to $135 a barrel, after the government reported a drop in gasoline inventories.

Would you believe me if I told you this is exactly what was needed? This will ratchet up the fear in a big way, evidenced by the put/call ratio moving as high as 1.35. In the process, we cleared out the negative divergences in the 60 minute charts and reset the oscillators. Fear is our friend.

In my previous analysis, I titled it Capital Preservation Time. That's because I felt a drop was imminent. So, hopefully you took heed and preserved capital when AAPL shot up in the morning. I had set the resistance at 188.70, it broke through that by a few points, it presented a logical sell point.

Also in this mornings analysis I had pointed to support at the twin 20s, the 20 day SMA and EMA, 180.70, and 179.20 respectively. I didn't think that AAPL would free fall through them both today. But it did, and ended under the 20 day EMA at 178.19 down 7.71 (4.15%). In the process it took out its uptrend support at 180 and change. AAPL had a great run, but it needed to deflate.

The S&P 500 lost its uptrend support at 1410, it now is left with its 50 day EMA. We have to expect things will settle out in the near term, perhaps some more selling, but advances are not likely. This is a good thing, as it will fully unwind the oscillators and kick the fear into high gear. We Bulls eat fear for lunch.

It's probably best to step away from your computer, take a breather and reflect. Not much to do here if your a Bull, other than to start planning your positions for when the market is ready to move. We're in a transitional phase right now, and so Capital Preservation is still the name of the game.

Apple, Market Technical Analysis - Capital Preservation Time

More selling is likely in the near term as the markets continue to consolidate. On the flip side, the markets are getting very oversold. So, my recommendation is to be patient when when you have such opposing indicators.

Click on the image to see expand it to full size.

Apple is also in consolidation mode as the price is converging on it's uptrend. The uptrend line poses resistance at approximately 187.70, with good support at the 20 day SMA at 180.87 and the 20 day EMA at 179.52. I expect AAPL will test resistance today, let's see if it has the legs to turn it into support.

It wouldn't be prudent to take short positions here, because of the oversold indicators. And new longs are not apparent as well, we are in limbo. As pessimism ramps up, we need time to let things settle. Now is the time to sit on the sidelines and wait things out. Capital preservation time.

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

Pre 3G, Apple (AAPL) Technical Analysis

Many wonder if the expected 3G iPhone has been baked into Apple's price. I'l have to say no. Apple has regained all this ground on the basis of their fundamentals and outstanding Mac sales, not the expectations of the new Jesus phone. I believe 200 is the correct price sans the 3G iPhone. The new iPhone, along with all the recent world-wide carrier deals, should bring Apple much higher.

Now for a technical analysis of a critical battle for both Apple and the Nasdaq (Naz), the 200 Day Moving Average (DMA).

Yesterday Apple (AAPL) led the Nasdaq with an initial charge at the 200 Day front. And although this isn't Apple's fight, as their 200 DMA is well behind them, Apple and the Naz share common interest in advancing through this level. For Apple it's strong price resistance, a remnant from a discouraging battle lost back in early January, which led to the infamous slide to 115.

This was the Naz's first try at a break through the 200 (2517 for the Naz), and first attempts at 200 DMAs rarely succeed. Apple has been a powerful force lately, but couldn't provide very good front line blocking this day because it had its own demons to contend with, being severely overbought (RSI >70) and strong price resistance in the 192-193 range. And don't forget, the Bears have a lot of skin in this game, they realize that a break through the 200 would be a major victory for the Bulls and will result in a surge of confidence that the Bears may have no defense in the near term.

As the day wore on, the Naz looked like it might do it, as it had climbed all the way to a high of 2528, with pretty good volume. But the Naz couldn't pull away from the 200, as the gravitational forces were too strong. By early afternoon "Big Guy Sell Time" was upon us, that's when all the Movers and makers (MMs) come back from lunch (approximately 1:35 PM). They had seen enough, yanked their toys from the sand box and went home.

AAPL led the "Big Guy" selloff, the rest of the Nasdaq soon followed

AAPL and the Naz both plunged for the remainder of the session, until they both landed on their respective support levels. For AAPL, that's the 186-187 range (established last week), and for the Naz it's 2500. The 2500 level had previously been strong resistance for the Naz over the past 8 trading sessions, but with today's break through it has flipped to become solid support.

So, will today be they day the 200 DMA falls? Or, will the Naz and Apple regroup, recharge their batteries, and put together a collective surge tomorrow? Truth be told, I'd rather go into the weekend with the Naz breaking though the 200 DMA of 2517, and close well above it, and for AAPL to also break through it's resistance range of 192-193 and close well above that. This would convert these levels from resistance to support. From there, we can continue the advance.

Federal Express, Market Outlook

Fedex was an interesting story today. It had been falling all last week prior to earnings. But this morning Fedex futures didn't budge (a clue). This morning it gapped down 3 points, then rallied nearly 5% to end slightly positive. It appears the MMs where profits, and fixed the price prior to earnings, thus earnings was a non event to the MMs. The day traders and smaller investors on the other hand were pawns in this scheme, they jumped in this morning going after a great short opportunity on the gap down. Little did they know, it was a Big Boy trap, as the MMs covered to meet Friday's close. Man these MMs are sneaky bastards!

Back to the Naz. It did pretty well today, albeit on fairly light volume, at least this up volume was slightly better than Friday's down volume (meaning today's Bulls had more strength than Friday's Bears). The Naz moved past resistance at 2450, and closed near it's high at 2488.49 +42.97 (+1.76% ), stopping at it's long-term down trend line. It still has the 200 day moving average to contend with at 2517. And if it takes that out, then there's the gap resistance at 2575, set back on January 6.

AAPL followed suit with a nice gain, but on very low volume. It hit resistance at 188.75 and closed at 188.16 +4.71 (+2.57% ), very close to where it ran into resistance last Wednesday when it went all the way down to 180 intraday. If you took profits at 188 or so I wouldn't blame you, I did at 187.70. I should note that AAPL is extremely overbought right now with the RSI at 72.65, but AAPL has shown in the past it can live in the stratosphere for weeks.

So, here's the lowdown. I believe the markets are going to try and rally Tuesday, because it would seem that's where the MMs want to take it right now. But if it starts up on little volume, I would be suspect. If it starts with good volume, it's probably the real deal. We would be looking for the Naz to clear 2517 (the 200 day MA). If it does that, then we're in no-mans land to the gap down. If we get there, that will be a new plateau from which we can look at some new positions. In the mean time, I recommend taking it slow.

Apple and Markets Take a Break

Yesterday was a day of unwinding. The RSI and Stochastics were peaking for days (70s, 80-100 respectively) on what seemed like an endorphin induced high. Investors were looking for just about any reason to take things down. You could point to any number of reasons for yesterday's decline; oil, housing market, consumer spending - any one could have been the catalyst.

So, today you can probably expect a slight advance, or rebound, to balance yesterdays pullback. Especially with stronger companies like Apple (AAPL), but I expect the next few days to be flat to slightly down while selling continues. The good news is that selling pressure has largely resided, and pessimism is peaking.

Huh? Pessimism peaking is a good thing?

Yes, especially if you're a perma-bull. When pessimism peaks, the supply/demand equation is usually poised to flip. It's a contrarian bullish signal. But don't get all giddy, because one day of selling doesn't wipe away a week or two of optimistic buying, it might take a few days. The good thing is that our floor of support is now higher than it was two weeks ago.

Speaking of support, we have a confluence of support indicators on the Naz at 2377, with the 50 day EMA, our neckline price support from the inverse head and shoulders, and the long term downtrend line. Also, for you candlestick chartists out there, yesterdays action formed a bearish engulfing candle, usually indicating a bearish reversal. I think it will be short-lived, expect good support at the 2390-2400 range.

So, as of this writing (9:20 EST) AAPL is trading up in the pre-market about a dollar, and futures are flat to slightly up. We'll probably see AAPL open slightly above yesterdays' close, and the action in the first 45 minutes will likely determine the rest of the day's trend.

As I said yesterday, this dip represents a buying opportunity, although I think the prime time was yesterday afternoon. Buying here or above does not provide a sufficient risk:reward, in my opinion. Unless of course, it drops below 181, then AAPL looks more attractive. This is one of those days, where you don't want to get too forceful, let the market play out. Less is more.

Recapping the Ecosphere Earnings Storm, Skies are Clearing

Like a hurricane, the lull before the earnings storm of Apple Ecosphere stocks masked its true intensity. Research in Motion (RIM) was well ahead of the storms leading edge, reporting pretty good numbers and upbeat guidance, it provided some wind under the sails of the tech sector, including Apple (AAPL).

About 2 weeks later the chip warriors, Intel (INTC) and Advanced Micro (AMD), presented the next wave. Both taped up their windows, and braced for impact by revising expectations, INTC lowering their gross margin a bit, and AMD taking an extreme stance, revising their revenues down a whopping 15 percent!

After reporting, Intel fared pretty well, coming short of last years numbers, but better than most expected. The result was a 6 percent rise Intel's stock price the following day. It was a silver lining to the winds ahead. AMD followed up with it a dark and grizzly wave, a huge loss in revenue and significantly lowered earnings. But there was no love lost, as the market dismissed it with optimism of AMDs plans for reconstruction. The difference today is that AMD remains under its 20 and 50 day moving averages, where INTC has risen above and creating separation.

After a surge of bad economic reports, the eye of the storm was upon us with Google (GOOG) and Apple (AAP). And GOOG brought clearing skies, the sun shone and the markets felt relieved. Next was Apple, at first glance, they had blowout numbers, but provided ultra conservative guidance. But as anyone along the east coast of the United States knows, the worst was yet to come after the eye has passed.

Mid week last week, volatility in the market started to whip up, as we were deluged with earnings reports. Surprisingly the storm seems to have subsided, as most of the reports were not nearly as bad as expected. And there's been a sea change, as big money decided that sector rotation from commodities to financials was necessary, with Goldman Sachs (GS) benefitting with a breakout from their downtrend. On the commodity side, Gold and Silver have taken a big hit, and agriculture is moving sharply off its highs.

So, now we have the Fed in front of us, and it looks like their rate cut cycle may be coming to an end to curb inflation. There are positive divergences setting up in the major indexes, which should help start an uptrend. Overall, things are looking up for GOOG, RIMM and AAPL, now that the storm has cleared.

What is your opinion, do you think we are poised for an uptrend? Write your comments below.

-zach bass

The Day the Market was Mesmerized, w/AH Update

One of my favorite books, is about time, and written a long time ago (in the late 1800s). It's called "Looking Backwards," by Edward Bellamy. Mr Bellamy was a college dropout, utopian science fiction writer, and can be credited with inventing the idea of the credit card as a means of commerce.

It's a Rip Van Winkle Story, about a gentleman, an upper class man, from the year 1887. He awakens in 2000 from a hypnotic trance (he calls it mesmerizing) to find himself in a socialist utopia. It was a book of ages, it inspired the writing of scores of books on utopias, and spurred a political movement came to be known as Nationalism. It seems at the time, people were desperate for answers.

Well, this diversion illustrates how interesting the market is this afternoon. There's nothing to analyze, nothing to monitor, there are no answers, and no questions. Things are just quietly coming to a stop, volume is down, and so is volatility. There's nothing left to do but wait for news from beyond. News from the after hour.

Sooner or later, the market is going to like what it hears, and we'll have our rally. Will it be tonight? Not likely, considering Intel (INTC: +0.22) seems to have been bracing for impact before the session closes. It's the unknown that's so tedious. And when things get that way, I must let go, stop clinging, and retreat to a corner of my mind and dream of utopia.

---After Hours (AH) Update

INTC (+1.69:8.1%) earnings did not disappoint, in fact it was received very well and juiced up AAPL, and others, in AH. This was a nice cap to a drab day. The last regular exchange trade for AAPL was 151.30, (+2.93:1.97%).

OK, so Intel reported well, but remember that they had adjusted their guidance down mid-stream, in order to temper any weakness at reporting time. Fortunately, they came in line with their original guidance, even tacked on another 1% to their original margin forecast to 56%. Guess that mid-session adjusted guidance was not needed after all. But I think it was instrumental in adjusting expectations.

Let's not lose our objectivity here, we're not out of the woods until we see the majors reporting, then we'll re-evaluate based on the preponderance of evidence. We have some household names coming up (Google, IBM, Citibank, Caterpillar, etc). You have to be thankful for Intel, as it was welcomed news, and let's hope that it can be a catalyst to an upward trend. Just don't get too excited. Keep the emotions in check, and party on!

Is the Right Shoulder Revived?

There may be a silver lining for those perma-bulls out there with tonight's after hour action. And that is the right shoulder of the inverse head and shoulder that I have been tracking on the S&P and Naz, may have been rejuvenated. It still has a way to go before it regains the strength it had prior to last Friday, but a nice push through some key resistance levels and we would be in business. The S&P 500 needs to clear 1345, and the Naz, 2313.

-zach bass

Market Recap: GE, We Bring Bad Things to Light

Here’s the Readers Digest version of last week in review. GE warns huge, Oil continues to climb, Financials are imploding, and earnings are on tap. Now on to the details...

Early on Friday morning I got wind of the Jeff Immelt (CEO of General Electric) interview on CNBC, where he tried to temper GE’s report of poor earnings and guidance by saying the first quarter results were “just a bump in the road.” But analysts were universally stunned, because GE has a long time reputation for providing conservative guidance and like clockwork, meets or exceeds that guidance. Upon hearing the news, I immediately issued a post to the AAPL Yahoo message board to take head in this report and recommended a predominate cash position. GE (-4.70) dropped a whopping 12.79% on Friday, and sent shutters across all the markets and wiped out recent gains made by AAPL (-7.41, -4.79%).

Many investors on the AAPL message boards have shrugged off this event, downplaying the report because the poor performance was largely due to GE’s sprawling financial services operation, and not so much by other GE divisions. But the consensus among industry analysts is universal, and that’s what really matters. At worst, most analysts expected the low end of earnings to be in the 50-53 cents per share range. No one expected 43 cents a share, and a 6 percent decline in profits.

Even Immelt was taken back by the poor performance, that mostly occurred in the last two weeks of March, and he linked it in part to the Bear Stearns debacle. He also attributed the bad news to their healthcare division and the slowing economy. On the bright side of the GE report, they have had stellar performance from their foreign subsidiaries, with 38 percent growth.

While I’m reporting bad news, I might as well pile it on with financials and oil. The downtrend continues for financials, as some of the stronger players, pierce their support lines, such as Wachovia (WB) and Wells Fargo (WFC).

And oil continues to rise, hitting a record $112 per barrel intr-day, and causing prices at the pump to soar across the country. This puts huge pressure on inflation concerns, and continues the squeeze on consumer sentiment, which was at a 26 year low. Hasn't been that low since the Reagan administration.

A possible near-term bright spot, are the negative divergences setting up in oil, signifying a possible retest of strong support at the $98-$100 per barrel range. Such a retest would relieve some pressure.

Apple is going to have to put on some kind of magic show this coming quarter to get people motivated to spend their discretionary monies. Let’s hope that Apples numbers don’t get swept out from under them late in Q1 like GE’s.

So, where do we go from here? I’ve been pointing to a bullish inverse head and shoulder patterns forming on the Naz and S&P. But with Friday’s action, we need to take a fresh look at things and re-evaluate, to see if sentiment has changed. The fact that strong support in the 20 and 50 day moving averages were compromised on Friday puts me on the fence, as to whether we can fulfill the head and shoulder bullish pattern, or if we are going to fall back to the next support levels of 1270.

With the bad news from GE, oil, and financials, it would not surprise me if we created some breathing room, and headed south a bit, to prepare for a backtest of the 20/50 MAs. And my suspicion is that backtest will give us a bit of trouble, before moving higher. Normally, an impulsive move down is not what you want to see on the right shoulder of an inverse head and shoulder pattern. What would have been preferable is to continue to shake off the remaining sellers, like we were doing, and clear the way for a breakout through the neckline. But now I fear that the Bears are going to be rejuvenated some. What we are left with is a quagmire, although a possible descending triangle forming might hold some hope, but that might not play out for some time.

So my best advice is to remain in cash, until we can make some head way through the new resistance. Like I always say, the most important thing in investing is capital preservation first, good profits second. And sitting in cash can be an enviable position. Besides, you want that cash to work for you when the time is right. Now, I do have some long alerts out there, in KBR and AG. Both weather the storm quite well. But I’m not going to invest a lot of time in them if they show any weakness going forward. Better to be safe than sorry.

-zach bass

Nice Shoulder, Can I Touch Your Neck?

Gotta love the action today. The right shoulder of this inverse head and shoulder pattern is setting up very nicely. But until we see a breakout above the neckline, that's all it is, a nice right shoulder forming. This is typical with this pattern, Bulls and Bears playing a tug of war, jockeying for position. Yesterday it was the day of the Bear, today it was a Bull day. We might see this go on for several more days, you just need patience. There's no guarantee either that we'll see a breakout at all, so prepare yourself for that scenario. But more often than not, this pattern is a winner.

A breakout on the Naz would need to pass through 2360, on the S&P 500 it's at 1387. If and when we pierce the S&P neckline, the next stop is the 200 Day Moving Average (currently at 1444 and change), so I wouldn't be thinking short here, just wouldn't be prudent.

So what made today such a good day? Well, advancers led decliners about 3 to 2 on the Naz, and 2 to 1 on the NYSE! Most stocks, like AAPL burst out of the gates early and held their ground right to the end of the session. And this all happened with markedly better volume than we've had the past two days. So, consider, down days we had lack luster volume, and today we had a big increase in volume, that's bullish in my book. I'm just not gonna let it get to my head just yet, and neither should you. Best to be stoic right now, supress the emotion. Remember, there are Bulls that are just as eager to bring this market down, so show them the respect they deserve. Only after the breakout can you have bragging rights!

The best recommendation is to have your cash ready. Because when she blows, your gonna want to shoot your wad.

-zach bass

Red Pill or Blue Pill Zach, Your Choice

Morpheus: "This is your last chance Zach. After this, there's no turning back. Take the blue pill, the story ends, and you buy a no load S&P 500 index and you dollar cost average yourself into blissful ignorance. Take the red pill, and you will embrace painful truths, and I'll show you how high AAPL can go."

The choice is not between taking an actual red pill or blue pill. Is truth and reality worth pursuing, or are we fine to accept secured comfort? Pink Floyd said it well in their song, Wish You Were Here, "...did you exchange a walk on part in the war for a lead role in a cage?" I could abandon the pursuit of AAPL and the Markets right now, pocket a tidy 20 percent gain made the past few weeks, and avoid all that hard stuff. Or, I could take the challenging path, analyze and accept the risks, reach for the glory.

I'm not going to sugar coat today's market action, it simply wasn't that good. Sure there are bright spots, like the volume, it was really low. The Bears had the opportunity to take the markets and AAPL down, but they didn't. On the other hand, the Bulls didn't step up and seize the opportunity. That was a real disappointment.

Market indexes butted into their 50 day EMAs and bounced off it, similar action with AAPL. But still no conviction in that bounce. There were things weighing heavy suppressing any advance, like oil hitting an all time high intra-session ($112.21), and Goldman Sach reporting a double dose of bad news. The Inverse Head and Shoulder pattern on the Dow, S&P and Naz are all still intact, remaining Bullish. On the S&P, we've got to break through the 1388 mark, the neckline, the obstacle to nirvana.

So the question is, do I take the safe route and pocket the profits in hand, clean, no mess? Or do I look back at what has been accomplished, and follow my convictions on where I believe the market wants to go? I've put up the good fight to this point, I've done the analysis, and reasoned the outcomes to the upside and down. It's time to enter the trail that I have cleared, and take that walk.

And Morpheus said: "Zach, sooner or later you're going to realize just as I did that there's a difference between knowing the path and walking the path."

This Lone Wolf Befriends the Sheep

I'm accustomed to bucking the trend, going it alone, taking the less travelled path. I'm the kind of guy that shuns the drab of the highway, preferring to search out alternate routes, spy future destinations. I can't tell you how many times I've been in the car with my wife, arguing because I chose to take the "scenic route" home. But that's me. I'm always scouting for the unexpected, the undiscovered, the unnoticed.

Well, after peering around some, I see something in this market that a lot of other people don't seem to notice, and it's looking tasty. All I hear is misery and mire, and it ain't gonna get any better any time soon. I'm not buying it, heck, it should be tacit knowledge that the media has a stake in this kind of doom and gloom. That's what they sell. Of course there are those pesky dark economic events that keep cropping up; bad earnings here, jobless claims there, financial institutions crumbling over there. Dang!

And yet, I've been avoiding this well travelled path of despair, and lately I've been getting this whiff of something intriguing. All along I've been bucking the mainstream and calling this market with fair regularity, feeling my way through, looking under here, peering over there. And wouldn't you know it, I've developed a different perspective on the landscape, and it don't look so bad. Here's why...


I've noticed this positive divergence in the major indexes, the Dow, S&P 500 and Naz for several weeks now. And recently I've seen the formation of a nicely formed cup and handle, which is starting to form into a classic Inverse Head and Shoulder (IHS). Now, all you chartist out there know an IHS is a bullish pattern. It was the formation of the right shoulder down, you want the Bears to lose their conviction here, and those bears were sheepish, evidenced by the ultra low volume, 1.63 billion on the Naz. This is precisely what you want to see.

Now, if I'm wrong, and this wasn't text book action, then the 50s are gonna get taken out, and all bet's will be off, and the Sheep will have bit this wolf in the ass. Well, I'm sticking my nose out and saying, "I've been down this road before, and there's a mighty nice den around that bend. Why don't all y'all sheep come over for lunch?"

Now for some more technical stuff. I saw some confirmation as well. The negative divergences I have been clamoring about were taken out today, and the oscillators got reset. The next step. or steps, is to move through some semi tough resistance, also called the neckline in the IHS. In terms of AAPL, the S&P is the index to watch, the neckline there is sitting at 1389 or so.

So, if the market starts lower tomorrow, with weak action, bounces of the 50s I would buy that weakness, with a tight stop. The 50 Day EMA is at 1353, and it's the first line in the sand. If we go below the 50 Day MA, currently at 1346, that would be undesirable. It would be hard to imagine losing it. I believe this pattern will play out.

-zach bass

Markets Forming Bullish Patterns Across the Board

The Dow Composite, S&P 500 and the Nasdaq are all setting up beautiful Bull patterns, Inverse Head and Shoulders across the board. I described this for the S&P in my previous post titled At the End of the Day Market Said Buy. There's still a lot of pessimism out there, and Alcoa (AA) earnings warning contributed. But the internals of the market are telling a different story. This is exactly what we like to see, shorts believing this recent rally isn't for real, while the internals disagree.

Advancers led by an 18-14 margin on the NYSE, while decliners led 15-14 on the Nasdaq, and new highs-new lows were 81-16 on the NYSE, and the Nasdaq was pretty flat with 57-79, but the Naz is traditionally a laggard anyway. And if you've been following my reports for the last several weeks, I've been screaming that long-term positive divergences have been setting up. We had some recent pull backs and then shot through resistances and tested them successfully on the backside providing future support.

  What is required here is a little patience as these right shoulders form. There will be some pullbacks, but that will be healthy for the pattern and will present buying opportunities. I see the markets and AAPL going higher in the near future. I don't think it wise to jump in here, wait for buying opportunities and then lock and load. Also, going short has no real future. The more cash you have on-hand, the better. And hopefully you took some off the table and sold into strength today before the AAPL retraction, as I alerted to this morning on the Yahoo AAPL MB. That cash will come in very handy shortly.

-zach bass

At the End of the Day Market Said Buy

AAPL gapped up today, then continued to rise. About midway through the day it retracted, shedding most of its gains, but retaining the gap-up. The S&P tested resistance, set back on February 13 at about 1370, to start the formation of the right shoulder of an inverse head and shoulders pattern.


The cool thing is that volume was light on the selling down, relative to average volume. This is a sign of weakness on the Bears, and conversely strength resides with the Bears. The backtest confirmed strong support at 1370.

Another bright spot, besides having another green day(+2.81), is that AAPL let off some steam, and reset its oscillators. So, I it's in good shape going forward, and set to move higher, along with the S&P.

We are now in a buyers market, and we're set to go higher here. Have patience.

-zach bass

AAPL vs Economic Calendar for Week of April 7,2008

Apple triumphed last week by breaking major resistance in its 200 day moving average. The next challenge is to establish the 200 as a base of support by backtesting it and moving higher with volume. So, what obstacles does Apple face this week?

Monday is the Consumer Credit Report (Analysis by Bloomberg), which is a lagging indicator of consumer spending activity. This is one of those ying-yang indicators where if outstanding credit balances rise too much, the people may not have the fortitude for continued spending, conversely interest rates will lower to attract new spending. And the reverse is true if credit balances are lower than expected. This could affect AAPL negatively if the reported figure is much higher than expected. It is reported at 3 PM.

Tuesday is Consumer Spending (ICSC-UBS), Retail Sales (US Redbook), and Pending Home Sales. The ICSC-UBS index is one of the most timely indicators of consumer spending, since it is reported every week, the US Redbook measure of sales at chain stores, discounters, and department stores. It is a less consistent indicator of retail sales than the weekly ICSC index (fxstreet.com reports, along with US Redbook). It seems the market was unimpressed with the rise in consumer spending, evidenced by the tepid response in the futures. Should provide a nice buying opportunity for AAPL.

Even in this tough housing market, existing home sales have been relatively strong. This should not affect Apple regardless of the outcome. If the report is significantly above or below expectations, expect a momentary bump in the markets, and then they will likely even out. Here are the results, as reported by MarketWatch (down 1.9%). Man, can nothing bring this market down?

Wednesday is the MBA Purchase Applications report and the Wholesale Trade Report. The Whole Sales Trade Report is an indicator of the over health of corporate profits. This might be important for a conglomerates like GE, but Apple will not be affected by the report unless it is totally out of whack with expectations - not likely. (Update, turns out the Wholesale Trade Report came in above expectations, cool!).

The MBA Purchase Applications report is a gauge on applications by consumers for loans on new home construction. And the report is very positive, as new applications jumped over 5 percent (source, MarketWatch).

This is significant, because new home sales over the past, well forever, has been one of the biggest drags on the economy. For every new home being constructed means more people working, means more money pumped into the economy, means more Macs and iPhones walking out the door!

Thursday Jobless claims rears its head again. This is a big test for the Bulls. If there is another push higher in jobless claims, will the Bulls be able to stave off the Bears as they had several times before? On the other hand, if the jobless rate is flat or lower, watch out. Apple and the market will surge.

Friday is a bell weather report, Consumer Confidence. I believe consumer confidence is turning for the better. I have no objective evidence to support this prognostication, so we'll have to wait and see. If it is somewhat below expectations, all I can say is, good thing it's reported on Friday.

There are also several companies reporting as it's that time of the year again. The only company that might have impact on Apple is Circuit City, ad they are direct competitors to Best Buy, which is in bed with Apple. It may also be interpreted as an indicator of consumer's appetite for gadgets and computers. I don't think it will have much bearing on Apple.

All in all, I think this week AAPL will have a shot at it's next resistance level of 160, but I think it will have to unwind its oscillators some, as it is a bit over bought.

That's a wrap,
-zach bass

What Is the Market Telling Us?

I swear, the media is determined to bring this market down. All you read and hear is recession, even the Fed Chairman is a doubter. Are we to believe this diatribe, or is the market telling a different story. The fact is that the media sells stories that have a maleficent undertone. They paint a picture of doom and gloom, that's the hook, that's what keeps us coming back for more. Sick, but true.

Once the doom and gloom schtick has cleared, the story loses its stickiness, and the media loses it's incentive to continue. Just like the Iraq War, once the surge started to work, it was like the war didn't exist, at least until there was a bell weather event that the media could exploit, like when we reach 4,000 American Soldiers killed. I'm sickened by this. We must remember these brave men and women for the sacrifice they made on our behalf.

The message of the financial markets (Dow, S&P, Nasdaq, etc) on the other hand, are not status reports of our economy. The markets are harbingers of what is to be. It is a reflection of the combined wisdom of millions of people, analysts, corporations, industries, and regions. The market is the closest thing to our collective consciousness, and it is imperative that we understand the message it's trying to tell us.

So, what is the market telling us? Are we delving deeper into a recession? Or, is there something stirring deep inside the market's gut that's going to short-live this recession, and spur a resurgence of economic vitality? One thing is for sure, the economy has been in flux, and the bell weather reports are largely negative. But a strange thing has been happening the past few weeks. Even in the face of horrific Jobs reports, rising unemployment numbers, and the implosion of financial institutions, the Bulls just won't let the Bears take control. So, here is what I interpret the market is saying.

Back in October of last year, the Dow broke out of major resistance at the 11,750 level (as seen from the 9 year chart) and climbed all the way up to approximately 14,200 before we had that precipitous drop. So, to turn the resistance line into support, we needed to backtest that resistance.


The first test of this line was back in early January, which kicked off a dead cat bounce rally that lasted until the beginning of February, or so. Then we went down for another plunge, only to backtest this level. And to the dismay of the Bears, it was a success. Thus confirming that this level now represents strong support. The Bulls win a major battle!

The shorts are still reeling over this, with their inane FUD posts on all the financial message boards and blogs. And those investors that are still clinging to the short frenzy over the past couple of months, are getting their clocks cleaned now.

The fact is, that 11,750 on the Dow represents strong support now, and the market is heading up in an impulse wave, that is a prognostication for a short recession. The down trend is dyeing, long live the down trend. It appears that the market wants to go up, and is telling us that now is the time to go long, and to continue this Bull Rally to its fruition.

-zach bass

ZACH BASS - Pre-Market Addendum

Well the jobs report was not good, the US economy shed 80,000 jobs last month according to Reuters. And unemployment moving up to 5.1 percent. This flies in the face of analysts consensus of 60,000. Who are these analysts anyways? They're akin to weathermen, 100 percent right 50 percent of the time.

The dollar was making real strides last night against the Yen, Euro and British Pound, but it looks like that trend is reversing. As I warned yesterday in an AAPL message board on Yahoo, I didn't feel it was in our best interest to get too aggressive in the face of the Jobs report this morning, looks like that advice will pay off. Now the test is to see how resilient the Bulls are. Can they stave off this bad news like they have the past several sessions?

Now, even though futures have gone from slightly positive to essentially flat this morning, sentiment is on our side. The Bulls seem like they're still in control. It appears AAPL is not daunted by the jobs report this morning, but that could change at the opening. Be patient, look for the market to be a little crazy at first, let it settle out, then make your move. Holding all long alerts until further notice.

That's a wrap.

-zach bass

ZACH BASS - Pre-Market Note

Yesterday started out looking weak, and the unexpected spike in new Job Claims didn't help. But the market held up well, the Bulls defended the 50 day EMA quite well, even considering the back and forth action. This morning there's the Jobs report. If it's really bad, it could send the market down hard, if it's marginal or good we should be in good shape. It would be interesting to see if it was a bad report, if the Bulls hold their ground like they did yesterday. That would be a very good sign indeed.

Analysts are expecting Friday's report for nonfarm payrolls to shed 30,000 jobs in March (overall 60,000), and unemployment to inch higher to 5.0 percent after a February decline of 4.8 percent.

The task of the Bulls, should they accept it, is to maintain the 50 day moving averages across the board. That would evolve the 50s into an excellent platform from which to build support, where in past weeks, it's been strong resistance.

The alerts I put out are working great! After just a few short days, we are well on the way to reaching the aggressive targets that I set. If they pull back due to a weak Jobs report, don't worry, we'll manage the downside and preserve capital. Both plays, due to the markets they are in, have some natural resistance to inflationary reports, so I'm not too worried. Here are the stats to date:

DBA - an Agi EFT
basis: $37.38
close: $38.21
target: $40
%gain/(loss): 2.22%

BHP - a natural materials fund
basis: $67.75
close: $70.55
target: $76
%gain/(loss): 4.13%

-zach bass

ZACH BASS - Market Update

You know, you gotta love this game. I mean a few days ago we get a huge breakout across the board, followed by a head fake trying to disguise itself as a selloff. Then great guidance from RIMM, apparently benefiting from the halo affect from AAPL.

Then this morning, I thought all hopes were dashed at the bulls regaining control, with the horrible earnings from GRMN and WFR. To compound my fears, a blow to the gut with the Jobs report, and just for good measure the futures were sporting a flat opening.

Then to my surprise, the market started to come to life, followed by a little side ways action, just to keep me honest, then things kept gaining strength. The bulls are trying their best to pull their balls out of their testicle lock boxes!!

Hey, we ain't out of the woods just yet. AAPL is doing fine, so are the alerts I put out there on the Yahoo AAPL message board (ORCL, DBA, BHP). But there is still an air of uncertainty in the market as a whole. I would take things light here, take profits when you can, let's sit back and wait for the next big indicator that tells us to step on the pedal.

It's up to the bulls now, they need to hold onto the support levels defined by the 50's. 12,421 (DOW), 1349(S&P) and 2330(NAZ). If we can close above those levels, it would be bullish.

-zach bass

Can AAPL Regain 200 This Year?

AAPL broke $150 yesterday then retreated. For a brief moment there was a gleam in Apple Investor's eyes. We were green after a huge breakout the day before. Did the bulls finally say enough is enough to the Bears, exclaiming, it's our game now. Then our aspirations of regaining the mountain slowly and steadily diminished. Was this going to be a repeat of all the failed breakouts before, same story, different day? We crossed into the red, and kept going down. But then, at the eleventh hour, actually a bit earlier than that, the Bulls regained their composure and said, not today, not today!

Like many times before, breakouts have been dashed the following day with not just retests, but massive selloffs. But not this time, this day was different. We were still above the 50 day EMA, and above it we stayed. That was critical if our hopes of regaining the hill was to be. AAPL followed along, though near the end of the day it looked for a moment that it was loosing steam. Is the Bear market over, are we out of the woods. Not yet, not by a long shot. This is a day by day battle, without yet a victor.

The back test yesterday was very healthy for the overall market, and AAPL. This is evidenced by today's action. RIMM helped to boost Apple, with strong after hours blowout earnings. Some would argue that the cache that the iPhone has generated has breathed new life into RIM. So, if we can clear 152.55 on a closing basis, I think we'll see we'll see 160 in the not so distant future. From there, resistance is futile. We'll be hopscotching our way to 180, going from resistances marked by past gap downs.

So, what do you think? Will we hit/surpass 200 this year? And if so, how long will it take. register your opinion in my "Apple Trumps RIM" survey.

-zach bass