AAPL Falls....NDX Lags...ISM On Deck.....Stock Market Turning Point?

Stock-Markets / Stock Markets 2012 Apr 01, 2012 - 06:59 AM GMT

Three days ago Apple Inc. (AAPL) printed a doji candle after a long run up. In most cases, 90% or more, and especially if you're not Apple, it usually means that the stock has topped out short-term. A doji, meaning a candle that gaps up and shows indecision after that gap up, where buyers no longer can take it up with sellers holding the line for the day. A stock will open and close at basically the same price. Apple, for once, has followed normal protocol. It has fallen off that candle stick the past two days. It has helped the Nasdaq lag behind the Dow and S&P 500.

Both of those indexes were green yesterday, while the Nasdaq finished slightly in the red. Is this a red flag for the market? Not really. Apple is very heavily weighted, and while it was down ten dollars, which really weighed on Nasdaq, other Nasdaq stocks did well enough to keep the losses to a minimum. Once again, the market has found a way to do some unwinding on those overbought oscillators where it needed them the most. The Nasdaq is the only index, which is officially overbought on the weekly charts. RSI was just over 70 coming into the trading day on Friday. That was, basically, all the responsibility of Apple. That which led up, helped lead down, but again, that was normal protocol for the stock market.

Apple has a plethora of support from 575 to 590, which includes the 20-day exponential moving average to many, many gaps. It will be hard for Apple to lose that 575 level initially, unless some very bad news hits the stock, and even then, when Apple goes lower, people fall all over themselves to get in, thus, it'll be a tough journey for the bears to break it down. It could happen, of course, but the job will be a very difficult one to say the least. There have been rumblings about the iPad 3, such as excess inventory, because it's not that much different from the iPad 2.

There have also been complaints about its weight and battery issues. With Apple being grossly overbought for ten straight weeks where its RSI never went below 70 for a single day, and often touching near 90, and with these new issues at hand, this stock may find it tough sledding for a while. That really isn't a bad thing for the Nasdaq weekly chart. It can have a chance to, hopefully, unwind decently below that 70-RSI level, which would then offer up the necessary energy to move the index back up higher again with some force. Apple will be a key stock to follow in the days and weeks ahead, with regards to that 575 level, folks. As long as it hold, it's likely the market will hold up well. If it breaks with force, we may be seeing a trend change for the short- to mid-term, where things will be more difficult for the bulls.

We will get some real insight as to what's up next for this market on Monday. The ISM Manufacturing Report, which is a very important report, will be coming out on Monday, with the number that will tell us whether our economy is in expansion or contraction. It will definitely still be in expansion, but the market wants to know whether it continues to do so, or whether things are starting to slow down and head back towards the recessionary

Peace,

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

Mr. Steiman's commentaries and index analysis represent his own opinions and should not be relied upon for purposes of effecting securities transactions or other investing strategies, nor should they be construed as an offer or solicitation of an offer to sell or buy any security. You should not interpret Mr. Steiman's opinions as constituting investment advice. Trades mentioned on the site are hypothetical, not actual, positions.

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