$SPX AND $INDU TEST RESISTANCE AGAIN -- $COMPQ CREATES A GARDEN HOSE PATTERN -- $NIKK AND $TNX CONTINUE TO TRACK -- CONSUMER STAPLES ETF MAKES NEW 52 WEEK HIGHS -- AAPL GRAPPLES WITH CASH MOUNTAIN, SPLITS SHARES -- FB CONTINUES MOBILE AD REVENUE GROWTH
$SPX AND $INDU TEST RESISTANCE AGAIN... The $SPX shown in the 60 minute view on Chart 1 pushed above 1884 this week and settled back on Wednesday. This morning the market surged higher on the back of great numbers from AAPL and FB. This is an extremely important place on the chart for technicians. After making a higher high on April 4, the $SPX made a lower low on April 8th compared to March 27th. The brief push up topped out April 9th and then made a lower low on April 11. As the market rallied off the April 11 lows, this becomes an extremely important rally. With the clearly lower low on April 11, we need to make a convincing push to new highs. This is even more important because the Nasdaq is still making lower lows and lower highs. On April 22nd we pushed back up to 1885 on the $SPX. This morning we made a test of 1885. Should the market break out here and push through 1900, that would trigger a significant number of stops and create a buying rally. However, if the market fails to make new highs here, short traders may add to their positions and force this market lower. On the big picture, this would give us a triple top on the weekly after making a clearly lower low.The $INDU chart shows the same pattern at resistance just below the major high. The $SPX and $INDU are always the strongest at the top and the other indexes usually fail first.
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Chart 1
$COMPQ CREATES A GARDEN HOSE PATTERN... The $COMPQ pattern on Chart 2 does not replicate the $SPX. I nicknamed it the garden hose pattern when I drew the trend lines on the chart. The $COMPQ is still trying to take out the April 9th high. It almost broke above it on the strength on AAPL and FB only to immediately pull back this morning. The bear market low of March 9, 2009 to the March 6, 2014 high is 5 full years within a few days.
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Chart 2
All that to say this is a critical turning point either way for the market. Every day is, but this one is a chartists decision point that would change the intermediate trend to bearish or continue the bull market parade.
$NIKK AND $TNX CONTINUE TO TRACK ... An additional place to look for clues may be in the Japanese $NIKK. Rick Santelli put up this chart (Chart 3) last week showing the $NIKK and the US 10 Year tracking. With a stellar correlation level considering they are worlds apart and equity vs. bond, these two are both hovering near (just under) their respective 200 DMAs. The 200 DMA is not shown for the 10 year and we can't use the $NIKK 200 DMA for the 10 year because the bond scale is on the left and is different than the $NIKK scale. The bottom line here is that these markets are also set up to break out either way from very important levels on their charts. Everything is set up to confirm the push higher, or all break down from meaningful levels on their respective charts.
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Chart 3
CONSUMER STAPLES MADE NEW HIGHS 5 OF THE LAST 6 DAYS... There is still a bid going towards consumer staples as they have made higher highs almost every day. Chart 4 shows the steady progression of the consumer staples sector.
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Chart 4
AAPL GRAPPLES WITH CASH MOUNTAIN, SPLITS SHARES... Apple announced a 7 for 1 split to make it easier for retail investors to buy into the stock. The AAPL ticker shown in chart 5 is showing a pennant pattern. The huge buyback they announced last night popped the stock up to resistance this morning. Investors now have the opportunity to start making higher highs here. That would be important for the chart to change trend and direction.There were no clues on the AAPL chart that big buybacks were coming .Other than bouncing off some support levels around 515, AAPL seemed content to wander lower.
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Chart 5
FB CONTINUES MOBILE AD REVENUE GROWTH... Facebook announced excellent earnings. Facebook topped the same day the Nasdaq did as shown on Chart 6. After pulling back more than 20% from the highs, Facebook is just under the 50 DMA. It is trying to break above resistance today and it would be important to see that trend continue over the next few days.
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Chart 6
Good trading,
Greg Schnell, CMT
