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Apple, S&P 500 Showing Signs of Possible Top


Presently there are a cluster of bullish cup & handles in a tug-of-war with topping cycles.

Editor's Note: The following is a free edition of Jeff Cooper's Daily Market Report. For a two-week FREE trial of his daily commentary and nightly day and swing trading picks, click here.

Come out of things unsaid
Shoot an apple off my head
And a trouble that can't be named
A tiger's waiting to be tamed singing

-"Clocks" by Coldplay

An apple for the teacher will always do the trick when you don't know your lesson in arithmetic.

The expression "apple of my eye" dates back to ancient Greece and Rome when people conceived of the pupil of the eye to be, like the apple, a global object.

The word itself comes from the Anglo-Saxon aeppel which literally meant both "eye" and "apple." In addition to providing the literal, vital sense of vision, the pupil was also regarded as the figurative "window" to the treasured secrets within each of us.

Apple (AAPL) has been the apple of the bulls' eye since March 2009. While the big monthly pivot low in Apple was at 78 in January '09, in March that year it left a monthly bar buy signal scoring an outside up month.

Since that time Apple has marched up in a tight monthly channel with no real sell signals on the monthly bar until last October, when the stock left a large range outside down reversal month.

Yesterday, Apple scored a nominal new all-time high above its October high but reversed to close in the red leaving a Topping Tail on the dailies.

Click to enlarge

As you know tops (and bottoms) like tests. So, the rally to a marginal new high roughly 90 degrees in time from Apple's big October pivot low at 354 must be watched closely.

The action in Apple from here must be watched closely for a number of reasons:

1. Tthe 354 low in early October vectors a price of 78. This was the absolute price low during the crisis. This occurred in January 2009.

2. Apple is 6 squared months or a natural 36 months from January 2009. So Apple found an important low at 354 last October, which was precisely 5 squares or revolutions of 360 degrees up. A 'master' 6 squares up equates to 434/433. Apple's significance as a market leader cannot be underestimated: 78 and 433 tie to the first week of March, the date of the S&P low in '09. In other words, the price of Apple's low vibrates off and squares the date of the market's low. Is it possible that a high in Apple will vibrate off the date of an important high in the indices?

3. Apple, like the market, is approximately 90 degrees/days from the big October 4, 2011 low. While the S&P has held up since last week's thrust, it has gone nowhere since. Those long believe the S&P is tracing out a bull flag the last four days on its way to breaking out over our key 1293 S&P cycle high from late October. The bears believe the market is going to break out in a rash, turning red in the process, and that market participants are itching to sell -- and sell short. The market is waiting with the S&P carving out two back-to-back narrow range days. Apple's action here may well be a catalyst which inspires a breakout or a failure.

4. Yesterday morning, with Apple trading around 427, we sent out a Daily Market Report alert noting a possible time/price squareout noting that 427/428 vectors the date of January 9 on the Wheel.

Click to enlarge

Yesterday was January 9, and Apple reversed from an all-time high of 427.75 to close down on the day at 422.75. Happenstance?

5. Time and Price may meet pattern at this juncture in Apple: if it leaves a weekly Topping Tail, it will leave a weekly Charlie's Angel sell signal (3 weekly tails in relatively close proximity), confirming a possible pattern of three drives to a high.

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No positions in stocks mentioned.

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