Yesterday I didn't tell you earlier about one of the things I was looking for (actually I told you before AAPL went parabolic and when I saw what I was looking for) because it wasn't a normal signal, just a theory I had. Today I will tell you that one of the other things I have thought about AAPL is that a downside reversal would likely be an event more than the usual process which is probably the first time I've said that. However the process has seemingly been underway already for some time.
The only thing in my view that can save AAPL and the market broadly speaking is some form of QE announced today, which the market seems to have already fully priced in, that results in liquidity finding its way to the market as it did with QE1 and QE2. Bernie seems to have some legacy considerations to consider along with policy at this meeting considering Romney's disdain for Bernie.
I can't speculate what the F_O_M_C might or might not do other than to say the market has been expecting QE3 since QE2 ended at EVERY F_O_M_C meeting and Jackson Hole and has been let down, but hasn't given up hope; this seems to be the final chance for 2012. With today's PPI providing the latest proof of rapidly accelerating gas and food inflation and with manufacturing going in to contraction the world over with one of the difficult areas being input cost inflation, it would seem almost suicidal to introduce any liquidity injecting form of policy right now, it would kill the already floundering consumer (as seen in Consumer Credit) and make the manufacturing contraction even deeper thus recessionary environments deeper.
As for the AAPL update, I think the game plan/Theory has been pretty clear, so lets see how it's developing with a little broader perspective on AAPL and a newly formed bull flag this morning.
On a weekly chart with ROC applied to price, you can see AAPL had a very healthy run with volume rising as it should with rising price up until 2009. I would have no problem saying the continuing price advance after 2009 on diminishing volume has everything to do with QE1 and 2 as well as expectations for QE3, rising price and falling volume has never been considered a healthy market. ROC has dipped with price in the past, it hasn't diverged with price in the past as it is doing now, I point this out because it's a change of character that few probably realize and changes in character lead to changes in trend.
Again volume climbing with price from the early 1990's and it abruptly ends on this weekly chart at 2009 as AAPL goes parabolic (keep in mind to lift the averages as Bernie clearly wanted to do as he cited the "Wealth Effect" of higher asset prices in Congressional testimony, the heaviest weighted stocks in an index are the ones that are targeted with excess liquidity); parabolic moves historically almost always end badly.
Recent price action has been choppy and range bound, sometimes the back of a stock is broken before price reflects it, the red arrows are what I consider to be important days for AAPL. Our concept of the bullish candlestick (which is nothing new) with a high surge in volume (that is a bit unique, but not completely original) has again provided for a reliable reversal. Remember there is no target/timeframe attached to these reversals.
Intraday from yesterday's rise and this am's gap up with flat prices forming a triangle, we have a perfectly shaped bull flag and volume confirming it, traders will front run expectations and buy this pattern in advance as it suggests another leg higher about the same as the first (+3.5%) once the flag breaks out to the upside, this is where we often see traps set as technical traders follow TA like it's the bible.
The short term charts are showing some deterioration -1 min
2 min
3 min
However the 5 min chart has been the main chart to watch.
I'm not sure I'd call this deterioration yet, but it needs to be watched closely. A 5 min chart can change and turn on a dime so as I stated above, be prepared for the possibility if not probability of a sharp/fast change.
No comments:
Post a Comment