Well in spite of this morning's glorious launch in the grossly manipulated equities market courtesy of the
As of this morning, AAPL seems to be confirming that at least a pullback is finally underway. But most importantly, although the NDX 100 is dropping with some gusto (at the time of this writing down 1.01%), AAPL is falling more than three times as hard (down 3.2%). And of course, as a result the ratio is turning south with a vengeance. What's most notable is that important trend lines have been broken in all three, AAPL, $NDX and in the ratio between the two. The implications are decidedly bearish for equities in general because the NDX 100 simply cannot continue higher if this ratio is breaking down. When a single stock that represents a full 17% of the entire value of the NDX, (a stock that is worth more than all the stocks in all the stock exchanges of Portugal, Greece and Spain combined) starts to pull the NDX down, the NDX is going down. AAPL is one powerful horse and it will not be denied. And you know what this means folks. If you don't, you haven't read the article yet.
We start by taking a look at the daily chart of AAPL which shows so clearly that a major trend line which has been providing solid support all year has now been cracked with a certain degree of enthusiasm:
|AAPL Daily - Click here for a live and updating version which includes a few indicators that suggest there is more downside to come.|
The most important detail is that although the Nasdaq is in retreat today, its major component is falling with triple the conviction. The net result is clearly shown on the chart of the AAPL:NDX ratio which itself has finally broken the first of its own rising trend lines, a trend line which has not only been rising since the March 2009 lows, but accelerating relentlessly the entire time. However, we should exercise a bit of caution and realize that these developments only represent an 'initial breakdown' because in reality it is only the very steepest of the trend lines that has been penetrated. We mustn't get too overly confident that a major crash in the NDX is imminent because there are still formidable rising trend lines beneath this ratio. We have to consider that they will hold until proven otherwise. But as of this moment it appears that they are going to be tested in the coming weeks and that the Nasdaq is in the process of putting in a correction 'at least'. In the daily chart below, we get a pretty clear picture that trouble is brewing:
|AAPL:NDX ratio - Daily - Click here for a live and updating version|
With all the above information in mind, I also don't mind reporting that coming into the trading day today I was slightly positioned short the market and 92% in cash. However, today's convoluted action, action clearly designed to suck in as many bulls and bears alike then whip them around much like a dog shakes his favorite slimy rag doll, I did indeed get deked out just like everybody else did... for a moment. I added to shorts. But when the downward reversal this morning did not develop in the S&P 500 nor the Russell 2000 as it did in the Nasdaq, it became evident that in the latter 2 indices a clear 3 wave structure had developed to the downside, implying higher prices in the coming days. In the 30 min. chart below of the S&P 500 we can clearly see the 3 wave structure that has evolved (something I was not expecting at the open of trading today). I do not profess to be an expert at Elliott Wave Theory so I rely upon the visions of my friends who are. However, I also have enough support for my new-found expectations of a bounce from other TA signals that I'm fairly comfortable with the strategy now in place.
|The 3 waves down pattern convinces me that OPEX week is in full swing. Click here for a live and updating 'print' version.|
In the chart below we see the potential building for a beautiful H&S pattern. At first I was expecting the right shoulder to peak at the end of opex, Friday April 20th. But now I'd have to say that's too early. In any case it's definitely a pattern to keep our eyes on. If you like you can click the link beneath the chart for the live and updating version, and bookmark it.
|The potential is building for this H&S set-up. Click here for a live and updating version. Let's see how this develops|
Best of success to all and I bid you a great, great week :-)