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Does Apple Reflect a Leopard's Spots?


When leaders are uncharacteristically weak on a strong tape, the market is talking.

While the years they come and go
Now, your love must surely show me
That beyond all time and space
Were together face to face, my apple scruffs
Apple Scruffs

--George Harrison

Under normal conditions, normal trading patterns, my expectations would be to see a pullback to test and/or undercut last week's lows. However, this is options expirations week which is why I mentioned yesterday that if initial resistance at 1510 could be converted and the 20 day moving average at 1518 could be hurdled, the S&P would be magnetized higher into Friday's options expiration.

Monday momentum picked up but fizzled into a weak close with Hoofy's pocket aces, Apple (AAPL) and Amazon (AMZN) pretty in pink. When leaders are uncharacteristically weak on a strong tape, the market is talking.

The S&P traded as high as 1515.55 mid-session coming within a whisker of kissing the underbelly of its 20 DMA, but ultimately, petered out and closed at 1509.10 succumbing to the reversal in AAPL which shed 4.32 on the session.

1510 is pivotal on the hourlies and important because remember, this was the Weekly Swing Chart Pivot – the level where the Weekly Swing Chart turned down last week. With the index going into the bell at 1509.10 the jury is out.

AAPL lived up to my moniker as the Soul of Sentiment on Monday. As soon as Jobs opened his mouth at the company's annual development conference to show off the many features of Leopard, the company's newest version of its operating system, it was deuces are wild as the market interpreted Apple's scruffs as underwhelming. Investors read the cards as a bad flop.

Although nothing was said at the conference that anybody didn't already know, the action underscores the notion that the iPhone is the most over-hyped product launch in the history of mankind – read stock well owned. It doesn't mean the product won't live up to expectations; it's just to say that little children in Timbuktu are plugged into the buzz.

Apple's green to red gig on Monday shows that the apple doesn't fall far from the tree – a bite out of AAPL is a bite out of market psychology. If the generals retreat, it tends to make the troops want to run for cover and ask questions later.

With that in mind let's take a look at what the charts say about AAPL:

  • The last big swing low on AAPL was at 50.15 in July 2006. On the Square on Nine Calculator, the price of 122 is seven-hundred twenty degrees up. Another ninety degrees up is a 134.

    A) 50.15, July '06, 720 degrees up from 50 is 122. 90 degrees up from 122 is 133. 180 degrees up is 146.
    B) Parallel Resistance based on Channel derived from this year's trendline.
    C) Note how a trendline shows parallel resistance at last weeks high.

  • Note how the Monthly Swing Chart turned down in December '06 as AAPL immediately carved out a low at 76.76. Five-hundred forty degrees from 76/77 is the price of 139. 540 degrees is often times a completion move.

    A) July Swing low and outside up month at 50.15.
    B) December '06 monthly turndown at 76.76.

  • The stock has been up six months from that last monthly turndown. July will be the seventh month up and one year up from the last major low at 50 dollars in the summer of 2006. It is interesting that the iPhone is set to be released at the end of June. Many turns occur in the seventh month, week or day.

  • Last week AAPL was seven weeks up from a swing low and carved out a Gilligan Reversal Signal on Thursday. Thursday was the seventh day up of the most recent run.

  • Note how AAPL tested the tail from last Thursday in Monday's trade before getting skinned.

The 121/122 level is important, as is last week's low of 117.90. Why? APPL has not turned its weekly chart down since the week ending April 13th.

Despite Monday's reversal in AAPL, the second reversal in three days and on substantial volume, the behavior on any turndown in the weekly chart and the behavior at the 116/117 level will indicate whether a potential target between 133 to 144 on this run is in the cards.
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No positions in stocks mentioned.

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