AAPL & AMZN after the bell tomorrow. Fireworks.
Is it possible that the markets have peaked for the year or perhaps for the cycle? I’ve offered this up for consideration a couple of times over the past few days and while I don’t have a crystal ball this scenario cannot be ruled out.
Back in late 2006 $NYSI peaked in the 1300 area. At that time, $SPX was trading around 1400. As $NYSI rolled over, $SPX did the same for a bit and then continued with the rally that began in 2003. By July of 2007 $SPX rallied up to the 1550 area but $NYSI did not confirm the new high range and instead was down around 200. After a pull back that lasted from August into mid-September, $SPX rallied up to 1570 area but $NYSI only managed to rise to about 400.
In this case, $NYSI indicated that the rally leading into the October 2007 high was done with weakness and with the participation of fewer and fewer stocks. Even though the rally of 2007 would take $SPX up nearly 180pts to the October highs, this was not being confirmed under the market hood and eventually the markets gave way. By March of 2008, before anyone was really concerned about the near financial collapse to come, $SPX had dropped nearly 300pts and was clearly locked in Bear Market.
But that was then and this is now.
$NYSI peaked in February of this year around 1300 when $SPX was trading in the 1330-1350 area. As $SPX rose from there to the March/April highs in the 1420 area, $NYSI continued to drop never confirming the rally. When the markets began to rally off the June lows, so did the $NYSI, but as $SPX began putting in new highs about 40pts higher than the March/April highs, $NYSI failed to confirm. So what we have now and what we had back in 2007 is negative divergence between $NYSI and $SPX. This is never a good thing but it need not lead to DOOOM, though it might.
This non-confirmation of $NYSI and $SPX is troubling, and it’s not the only thing that is not confirming the move off the June lows. The Cumulative Volume Index, which is T2104 over at FreeStockCharts.com, has also failed to confirm this latest rally. CVI peaked in April and while it too did rally off the June lows, it has failed to put in a new high along with the markets.
Could be nothing more than wasted speculation on my part, but things like these cannot be ignored. We should be bottoming here, as has happened in so many other Octobers, but that does not appear to be the case. Earnings continue to disappoint. Railroads were down huge today which is where all the weakness in $TRAN came from. AAPL and AMZN report tomorrow after the bell and they both need to blow the doors off but if that doesn’t happen then there will be trouble.
Chart courtesy of StockCharts.com
You probably think that I’m just being paranoid. Well, duh!
GL and be careful trying to front run AAPL or AMZN either way.
Oh, and the $VIX isn’t at 20 yet and if or when it does get to 20 then that’s when we’re really going to see some volatility, or, you ain’t seen nothin’ yet.