Apple and Market are Doing the Volatility Shuffle
The past few sessions in the markets have been a roller coaster ride. After each of the major indices bounced off the 200 Day SMA last Tuesday there was rampant selling, which caused all the markets to be severely oversold in all chart timeframes (60 minute, daily and weekly). We caught a slight breather on Thursday, with what would generally be described as a dead cat bounce, but the selling on the indexes continued on Friday. The S&P and Nasdq found support on their 50 Day SMA and 50 Day EMA, respectively. The Dow was not so fortunate as it pierced it’s 50 Day SMA, which now presents resistance.
AAPL managed to buck the trend on Thursday, after being pulled down with the S&P early in the session, then recovering from a sizable dip to put in what appeared to be a bullish hammer on good volume. AAPL rallied on Friday, gapping up. AAPL fell early on Friday’s session, then spurred a rally leading the tech sector, along with other Nasdaq majors like RIMM and GOOG, into the weekend.
After a glorious Memorial day weekend, the all markets rallied on weakness in Oil. And despite Oil recovering yesterday, the markets continued to advance. The problem now is that we are still oversold on the daily charts, meaning that we will likely see more buying, but that will setup negative divergences with the MACD as we head towards this weekend. This makes the market tough to call in the near term, as we are in no mans land right now with continued oversold conditions. Which way will the market go? That is the question.
Each of the indexes have broken their uptrend in this action, including AAPL. The S&P has major price resistance to contend with up to the 1400 level, and the Dow and Nasdaq have the 50s to look forward to. AAPL, on the other hand has blue skies, but can it advance forward against all the indexes? This looks like a Bull trap in the making, with the Bears just biding their time.
The good news for the longer term, from a contrarian point of view, is that sentiment is moving from neutral to very pessimistic. I get a lot of blank stares when I say things like that. But this is what I see. The put call ratio is rising rapidly, consumer confidence is going to hell. I just filled up my tank this morning and the price at the pump was $4.16 a gallon! So, I’m down with this. But this is exactly what a Bull wants to see, because when things get to be their worst, is when a market gets poised to explode.
So, what do I expect in the near term? More volatility, up and down action, at least until those Bearish negative divergences sink their teeth into this market. That will likely cause a pull back that will peg the negativity meter. And from there is where I see the turn around for the better. In the mean time, I’m going to sit back and just watch the action. Good times.
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