Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Thursday, August 25, 2011

Not Good 8/25/11

Stock Market Technical Analysis

Click on above image to enlarge

The background image above shows that after today's selloff, the DOWs 50 dropped through its 200 confirming a triple death cross on all three indexes.

The market did indeed sell off today.  All the talking heads in the financial media were out touting that Steve Jobs resignation would have no effect on AAPL, and in the Level II window you could easily see that all of its market makers were aggressively defending the stock.  Nonetheless, today's sell off probably would not have happened if the market had not been left vulnerable because of shocked tech stock fans this morning.

Jobs resignation announcement could have waited a day.  One day later and today might have had a different outcome.  In the past, positive announcements from Apple have been timed to help both AAPL and the broad market, and negative announcents were never released at big pivot points.  At yesterday's close we reached a big pivot point. The VIX (fear index) had just got down to its 20 EMA line and the lower line of its big uphill channel. ( This morning's market push - Warren Buffet's BofA buy in announcement -was timed to break us down thru the 20 EMA line and lower channel line of the VIX and confirm a new leg up.   Instead the tech stock sentiment was so sour this morning the market was quite vulnerable.  The very minute the VIX began to bounce up from, instead of dropping down thru that lower channel line a massive computer sell program kicked off in Germany and took the DAX down sharply spooking the market lower.  If  the AAPL announcement had come after the bell today instead of last night then the VIX would likely have broken down this morning when they wheeled out Warren Buffet and a sustainable rally would have been confirmed, which wasn't the case and before we had a chance to drop out of the VIX channel the VIX reversed and turned up at the 20 EMA and its lower channel line also, setting up the market to begin another leg downward if we don't get some sort of really major announcement from Bernanke on Friday that investors feel will actually help the economy.  Timing is everything and it appears that AAPL missed it by a day this time and indirectly caused a market downturn reversal at a volatile and sensitive pivot point - the VIX right at its 20 EMA line and its lower channel line.
I overlayed two VIX charts on top of the triple index chart.  The upper VIX chart shows it bouncing from its lower channel and the lower shows it bouncing from blue 20 EMA .  There is little doubt the VIX would have dropped out of this channel and down through the 20 line at today's open if the market had not been vulnerable from the loss of the innovative genius of Steve Jobs.