Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Friday, November 2, 2012

Dollar & AAPL Sink Market

Stock Market Technical Analysis Blog

click on image to enlarge

Looking at the three left side weekly bars charts above of the VIX, Nasdaq, & TLT (20 year bond ETF), we see that the VIX and the bonds are as of tonight still merged to an absolutely neutral point as the Nasdaq had its two EMAs come closer together with this week's weekly bar.  With two of the three still in perfect neutrality, it will require at least another weekly bar, maybe two, to get the red line breakouts that will establish the next direction in the market.  An interpretation guide to the triple index shown on the left side above is located in the October 30th blog.

Looking at the top right chart we see the weekly bars chart of the Nasdaq where the bulls are intent on turning the red 5 EMA line back upward next week by pushing up from the blue 20 line.  If they succeed over the next couple of weeks in turning the red 5 EMA on the weekly back upward it should be plenty of lift for a year end Santa Claus rally.

With yesterday's strong show of support at this weekly 5//20 juncture the bulls appeared to be back in control but today the market was broadsided by two bearish events.  The first was that the dollar gapped up above its channel as shown in the right side center chart (UUP).  After the UUP has found resistance several times in the past week and a half at that upper channel line, it was pretty much a done deal that today it would start trading back down toward the bottom channel line which would cause the stock market to head upwards as they trade inversely.  Instead, the UUP gapped up well out of the channel at the open and continued to climb, a serious blow to the market.  I've shown in multiple blogs through the past years that anytime the UUP breaks upward out of a channel, the stock market has real trouble until the dollar comes back down into the channel.  They did try to counteract this UUP breakout by gapping up the Nasdaq this morning but selling came in immediately and accelerated throughout the day.

The second bearish event today happened in the early afternoon when AAPL got down to its 200 day EMA line.  The 200 EMA line is pretty much the last stand for the bulls and when it is lost even the most hardcore bulls tend to flip and go short.  The widespread expectation was that Wall Street could support it at that line at least for a day or two.  However, it sliced down through it like butter and heavy sell programs swamped the market into the bell.

The history of AAPL has been that after a nasty sell-off day it usually has at least a partial bounce back the following day.  With Monday being the day before election we will have to see if the obligatory bounce actually happens especially since the market took a real bruising from the surprise one-two punch of the Dollar & AAPL today.  If the 5 slips down through the 20 on the Nasdaq weekly chart in the top right corner instead of bouncing up from the 20, a Santa Claus rally will be a long shot without a major market intervention.


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