AAPL: It has been, it is, and it will be all about APPL. As I wrote several weeks ago, since the 2003 lows the markets have never had to deal with an out of sync AAPL. Now AAPL has decoupled and is moving to the beat of a different drummer and this is having a direct and negative impact on $NDX/QQQ, $SPX, and $COMPQ.
I don’t know AAPL’s weighting in $COMPQ but as of Friday’s close, AAPL is 16% of the $NDX and, at 3.6% of $SPX, is the biggest stock by weighting in the $SPX. Clearly, as goes AAPL so will go these other indexes.
AAPL is down 27% from its yearly high but is still up 26% on the year. When AAPL closed up around $700, $SPX was up 15% on the year. Now, with AAPL 27% off its high, $SPX has lost 3.5% of its value but still remains up 12.4% on the year. There are other reasons why $SPX is down but it may not be too much to assume that with every 10% drop in AAPL then $SPX will drop close to 1%. Friday’s percentage drops in AAPL & $SPX imply that this 10:1 ratio could be used as a rule of thumb.
What to do, what to do? The answer is, don’t take your eyes off AAPL.
$VIX: On the $VIX 60min chart, the RSI 14 closed at 65 on Friday. This suggests that we could see some more selling at the open on Monday. If this does in fact occur, then more selling will doubtless push the RSI to and/or above 70, at which point the $VIX would be overbought. Once the $VIX becomes overbought, then I would expect the market to stabilize and perhaps bounce, though I have no idea how high or for how long.
$NYSI: On Friday, $NYSI went negative by 3pts. This isn’t much of a negative turn and no ‘sell’ signal has yet been generated on the various charts I use for $NYSI. However, $NYSI needs to be watched closely in the next several days because if this doesn’t right itself soon then the market will not be able to ignore the fact that weakness has replaced strength in this key breadth indicator.
Caveat: Forget all of the above if there is some positive news out of D.C.
We’ve had two days of pull back which brought $SPX down 4.49pts and 0.32% on the week. My analysis says that we should get some more downside sometime Monday which will push the RSI on the 60min charts of $SPX & others into oversold territory while at the same time pushing the RSI on the 60min chart of $VIX into overbought territory. If this happens, then there should be some kind of positive technical reaction of one degree or another. We may not bounce but we may at least quit going down for now.
Daily chart of $SPX. This chart looks okay. We’ve got a series of higher highs and higher lows as this particular rally inches up a wall of worry. This area from 1402 to 1398 is going to be extremely important as a support level because if it doesn’t hold then we’ve got a new low to consider. That’s potentially 15pts lower from where we closed on Friday and we really shouldn’t get down to this area as the pull back should have concluded long before then. However, should we break through this 1402-1398 area then nothing says we don’t drop all the way back to the 1343 area and head south from there. Further, if we do break this 1402-1398 area, then it probably means that we’re seeing capital gains tax selling and if that turns out to be the case then you can expect that selling to continue right up to the end of the year. Also, if the 20,20 Sto gets a bearish cross any time next week, I will get out of the market and ask questions later, if you catch my drift.
Lots of chicken scratchings on the chart so click on it and it will open larger in a new window. Also, if you can’t see the chart it’s because Trading View is down or doing some kind of maintenance so check back later.
There’s no reason to believe that AAPL magically put in a bottom on Friday or will do so on Monday, or any other day, for that matter. I still believe that AAPL has a lot more downside in its future, though not necessarily in a straight line. It’s unfortunate that so many key sectors and indexes are being held hostage by one stock, but that’s the way it is and until AAPL stabilizes and/or starts to move up, there is an obvious high risk of loss for longs in the market.
Watch AAPL, be careful, and GL in the week ahead.