Wednesday, December 05, 2012

AAPL Suffers as C and BAC Enjoy Big Moves

A wild day on Wall Street as stocks stage an intraday reversal only to give back gains at the close. Once again the market was ready to fall apart and we were able to find buyers at the lows. AAPL tumbled hard while BAC and C raced higher. The market liked these two gigantic banks were cutting costs by eliminating jobs. Volume rose across the board giving the NASDAQ a day of distribution and stall days for the S&P 500. At one point it appeared the Dow would put in a follow-through day (and NASDAQ a distribution day), but ended the day in stalling action. We are still without a confirmed uptrend and wild intraday action. In addition, we still have failing breakouts. Adding all of this up cash is very much king. All eyes will be on the ECB tomorrow morning. Since the last ECB meeting the economic landscape in Europe has not improved, but worsen. Expectations is for the central bank to leave rates steady as borrowing costs across the continent have dramatically been reduced. More importantly, it will be how the market reacts to the central banks comments. Given the movement off the recent lows the European stock markets are expecting the central bank to produce something for them to continue their trend. After the ECB announcement we’ll get initial jobless claims and a look into Friday’s job report. Let the fun begin from CNBC and their over-analyzing the data and blaming Sandy. Market action is where our attention will be focused. There is something sinister going on with AAPL. Perhaps the rumor of a dramatic reduction in demand or some fund was forced to dump was the cause of the sell-off. To be honest, we do not care the reason for the decline and what we know was today the stock sold off in heavy volume. The stock’s trend is down and it appears there isn’t much that will stop this stock from taking out the November 16th lows. AAPL is a beloved stock and owned by many institutions and if the selling continues the exits will become very crowded. Do not be a hero. The NASDAQ remains below its 200 day and 50 day with the S&P 500 continuing to find resistance at its 50 day moving average. Until we see these indexes move above these moving averages with conviction and without a follow-through day the long side is not safe. Cash is king and we continue to tread very carefully in this market.

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