Today’s analysis is by Geoff Bysshe. Mish will return Monday April 23rd.
Earlier this week I highlighted how the market can be influenced by the actions of a few big components of ETFs.
On Friday AAPL fell hard.
The media will blame it on an analyst downgrade, and fears of slowing sales in China, but that’s only the catalyst that explain why it fell.
It doesn’t explain why it fell so hard.
When sentiment and momentum is strong, negative news (i.e. an analyst downgrade) leads to modest pullbacks in a trend.
However, if the sentiment and momentum is negative, the news can be a disaster, even when the price trend looks healthy (i.e. APPL)
If you attended my free training session on Thursday evening you saw that AAPL has been under pressure from a negative momentum trend for almost 6 months as measured by our ‘Real Motion’ indicators.
Unfortunately, AAPL’s the biggest component of the QQQ (11%), so it was dragged down by AAPL.
The market’s sell off was not all AAPL’s doing, but it does help explain when the QQQ’s got hit twice as hard as the SPY and IWM on a percentage basis.
Monday is going to be an important day, and Friday’s range may prove to be a pivotal range going forward because…
Last week’s attempt to reclaim the ‘bullish phase’ was a particularly critical one, because it’s corresponding with the same type of bearish ‘Real Motion’ condition that has plagued AAPL for months.
If the markets brush of the last two day pullback and resume the uptrend, it would be very bullish.
However, the opposite is also true.
In this week’s Market Outlook video, I covered this market phase and ‘Real Motion’ condition in greater detail than I can share here.
S&P 500 (SPY) Back to a warning phase, but sitting on the 10 DMA. Look for resistance at 267.70, 270 and then the swing high at 271.30. Support at 265 and 264. 200 DMA is at 260.25.
Russell 2000 (IWM) Held up well, but closed in decisively at stopping at logical resistance. Look for support at 155 and at 153.50.
Dow (DIA) Back to warning phase, but sitting on the 10 DMA. Key support at 241.40 and 235.
Nasdaq (QQQ) Back to warning phase, but sitting on the 10 DMA. Key level to clear to move up is today’s high. The 162 area was and should be support, then 160 and 159.25. Then 153 is the big low level.