Sunday Post-Market in Correction, Apple in Trouble 10/22/12


The Nasdaq is in trouble, mainly because of the horrible performance in GOOG and AAPL last week. There were others in the group that acted poorly, but let’s face it, it was mostly those two.

AAPL broke the neckline of a textbook head and shoulders pattern  and the question  now is where does it go from here?

There are two possibilities as I see it.

#1- It may find support at the 200 day moving average which is the 583 level.

#2- It finds support at the 61.8% Fibonacci retracement level which is a little higher around 592.

AAPL reports earnings after the close on Thursday and there is obviously a “discounting” dynamic going on here. There has been so much negativity surrounding the name lately that funds want to take profits ahead of a possible weak number.

You can see below that the QQQ’s broke the 50 day moving average about 2 weeks ago.

The S&P however is trying to hold its 50 day moving average. I am not panicking as it closed below it by a matter of pennies on Friday, so Monday will be a truer test as to where it may want to go near term. Closing levels are always more important than intraday levels.

As you ca see below though, the S&P may be trying to violate an “up” channel (white lines) that has been in place since late May. The lower ascending white line is trend support. The yellow and purple lines are immediate support areas. You may also view that channel as an ascending wedge which is bearish, but we don’t know how this will play out yet.

As usual, I looked at a bozillion charts this weekend and I’m not impressed at the moment. Most charts have broken or are in the process of breaking.

I am still bullish for now, and I maintain my stance that corrections in this market will be fairly shallow and buyable. That is probably still the case unless we aggressively violate anything early in the week.

If I do see some signs that we have put in a tradeable bottom this week, I plan to get aggressively long. I will email you if I put anything into play. Still too early to tell if this will last for a couple of days or a couple of weeks.

See you on the chat room in the morning.


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