Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Monday, October 22, 2012

A Rabbit Out of the Hat

Stock Market Technical Analysis Blog

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Uncle Ben should receive a gold star for the events that took place in the market today.  In this morning's trading the markets continued to sell further down on strong volume but AAPL was driven up at the open and as the morning went on the broad market selling started to slow as everyone came to realize that they were going to drive AAPL up today no matter what it took.  By midday AAPL peaked back above its 108 EMA line shown in the upper cluster, bottom center chart.  As it crossed back above the 108, the entire stock market reversed and a massive short squeeze took all the main indexes all the way back up producing hammer reversal candles on the DOW, S&P, and SPY.

With this dramatic one day reversal the tip of the red line sentiment EMAs on the three indexes in the top row pulled back above the green line to put the bulls back in control.  Looking at the lower cluster, we see that AAPL's rescue turned the SPY and Nasdaq back upward at the lower line of each one's five week descending channel as AAPL ran to the top of its descending channel.

Looking at the three bottom charts, the first shows the hammer reversal candle on the SPY.  The second chart shows the weekly 5/10/20 EMAs of AAPL, and the third chart is a focused in view of AAPL's weekly 5/10 red / green EMAs where we see that these two have come to a fine point as of today's close.  Any movement in either direction from AAPL tomorrow could be the beginning of either an upturn in AAPL or a sudden drop in AAPL because its weekly 5/10 EMAs are to an absolute point now.

AAPL's event conference is tomorrow and the path of least resistance for AAPL will be up.  If it moves up just one dollar we will have a breakout of its five week downtrend channel that should trigger widespread buying programs much the same as Friday's action triggered widespread selling programs.

If AAPL can't break out of its downhill channel tomorrow and starts another wave down inside that channel then it could suffer a serious blow as a fall from where it is at would cause the weekly 5 to cross down through the 10, something that hasn't happened in over a year.


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