Monday, May 21, 2012

AAPL Leaps 5% as Stocks Rebound from Tremendous Selling Pressure

AAPL and PCLN help the NASDAQ push higher as FB drops hard on its second day trading on the NASDAQ. Volume on the day was considerably lower than Friday’s level, but Friday we did have options expiry skewing volume. Today’s bounce was not a surprise to many as the oversold conditions in the market had gotten to extreme levels. Given the green close today on the NASDAQ today counts as day one of a new attempted rally. Despite today’s rally the market still remains in extreme oversold conditions and this rally has the potential to have a bit more oomph behind it. The G8 summit only left one headline and that was they were supporting Greece as a member of the European Union. Any other headline not supporting Greece in the Euro would have sent global markets into a death spiral. It does appear a bit dire with many of the European countries having a difficult time containing spending and bringing in revenues. The European central bank will have to undergo a massive liquidity injection to avoid immediate danger. However, simply printing money will only lead to bigger problems if the fundamental problems are not dealt with. The situations remains quite dicey, but it is why we follow price and not our opinions. A lot is being made of the RSI being so low recently, but the amazing part is the lack of fear the VIX index showed as the market pushed lower. We never saw real panic enter the market as we have sold off to the 200 day moving average. AAII Bears did jump considerably last week and Bulls dropped to very low levels hinting at a possible short-term bottom forming. In our forums we highlighted the need not to push on the short side as a snap back rally was very likely. Now, the market will more than likely continue to work itself higher and it would not surprise us to see the NASDAQ make its way back to its 50 day moving average. Anything is possible and we are prepared for anything. Rally attempt is here and if this bounce has legs we’ll see a follow-through day on day 4 thru 7. Stay patient and always cut your losses no questions asked. Enjoy the week.

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