Jobs, a Market Changing Event?

We start out this week where we left off last week; late Friday I posted this update on the Euro and true to the pattern volatility and the 3C charts on the Euro, it does look like that was a reversal formation/distribution area.

The square is the pattern mentioned in last week's post, the arrow is the start of this week's FX trading on a 15 minute chart. As you can see, the Euro appears to have reversed, for now at least. How far this is going will remain to be seen when the market opens tomorrow, I'll take a look at FXE/ UUP and see how serious this move looks to be.

Some other notable events last week included the VIX closing at new lows since 2007.

This is not the first time we have seen the VIX hit 2007 lows, however as you may know the VIX typically trades inversely to the market and extremes are often reversal points.

The huge positive divergence in 3C on the VIX remains. You can see what happened last time we had a much smaller positive divergence last year, the market sold off hard. This divergence below is much, much bigger.

In some other news, Steve Jobs has taken a medical leave of absence Monday-THIS IS NOT RUMOR. In the past, speculation over Jobs' health has negatively impacted shareholder value. Thus far we don't know what the indication will be in US markets, some speculate AAPL could take a 15% hit. In Frankfurt on Monday, AAPL traded -6.2% to -8% lower.

Effect on the market...
Considering AAPL's weight on the NASDAQ 100 is near 20% or about equal to the bottom half of the NASDAQ 100 combined, any downturn will significantly impact the NASDAQ 100's performance this week. This is one of the reasons I did not want to try any earnings plays for Friday A.H. or Monday, there's just to much that you can't control over a long weekend and we want to be able to control as much as we can, especially in speculative earnings trades.

Another angle to the Jobs story is the amount of hedge and mutual funds holding AAPL. It's difficult to predict what may happen, but should a run out of AAPL shares take place, we could see some very interesting trade this week. The averages tend to move together and the NASDAQ won't take a -2% hit with the S&P and Dow in positive territory.

Furthermore, the market is about sentiment, not valuation. If the later were true we wouldn't be trading up here where we are. Should sentiment shift as a result of the AAPL catalyst (and I've talked recently about sentiment having shifted as evidenced by poor market breadth), we could be in for a real ride, especially with European contagion ad the reversal in the dollar thus far which won't help the multinationals and our short trade in MCD.

I don't want to speculate too much here as we do have a market moving catalyst at hand. As I've said, this market's poor breadth leaves it one headline away from a major shift.

I will say that we had a 3rd day on Friday of a dual price/volume dominance, both were price up-one volume up the other volume down. 3 Consecutive days of this behavior puts the market in an overbought position, with the AAPL news, the poor market breadth, the cracks in the bellwether names and the extremely low VIX, this could be a watershed week for the market.

Lets get a feel for the sentiment and see where the opportunities pop up.

Have a great week.