First: An Apple update
All the financial media outlets are leading with stories about the stock price falling briefly below $400 per share today. Take a look at the weekly chart below and you’ll see the stock has now lost nearly 50% of the gains it achieved since the 2009 low. It’s also fallen to a decent support level at current prices as delineated by the consolidation range set during the fall of 2011. On the bottom of the chart you can see that the MACD lines are getting close to crossing up – an event I believe would mark another bottom in the stock price.
On the daily chart below you can see we broke the steep downtrend back in mid-March and today’s selloff is testing both the top of that trendline and the bottom of a newer trend channel. As I noted at the time there is a 9-13-9 DeMark buy signal in place. In addition, RSI and MACD have clearly diverged from lower prices suggesting a bottom could be forming.
The bottom line is I’m still very bullish even though the stock has fallen another 10% since my ‘Mr. Market is wrong about Apple’ post. This is why it’s best to scale into positions like this rather than go all in at first.
Second: A Market Update
I’ve been bearish on stocks for about a couple of months now and wrote the other day that I was looking for an “air pocket.” Monday’s selloff could qualify as could today’s but I’m really starting to worry about a bigger, more dramatic decline.
The main index that has me worried right now is the Russell 2000. The uptrend that began in November is broken and there is a clear head and shoulders pattern now formed on the daily chart (below). It closed today below the neckline and the pattern projects to about 870, which is right where the 200-day moving average is sitting. The chances look pretty good we could see that further 5% decline come in the form of another “air pocket.” The Dow Transports, Semiconductor Index, and others show similar variations on this theme.
Longer-term the S&P 500 has become significantly overvalued just as it’s run into significant resistance at current levels (below). Ultimately, all the ‘new, record highs’ headlines might just mark a head fake (false breakout).