Tuesday, October 20, 2009

Market Observations - Apple and Goliath

Similar to the 2007 high Apple has created a high level of excitement. Apparently enough that most people I saw on CNBC are screaming..."the coast is clear. You have to commit capital to this market." Well, if you look at the chart below of QQQQ, I am pretty sure that you can guess when the last time was that these very same words were being plastered all over the financial media based on Apple's results. If you guessed Oct 2007 - you would be right. That resulted in a throw over of the multi year channel. Followed by a failure and a retest where a new high in Apple shares was not confirmed by the Nasdaq 100 or the Composite. We are at different degrees of trend now, so the QQQQ's may only be confronting that lower uptrend line. But in any case, the optimism is the same. Over 90% bulls in Oct 2007 and over 90% bulls in 2009...with an Apple earnings pop. Very dangerous times for a long if history is any guide.

Additionally, the SP500 only needs one more wave to complete 5 up into the gap zone and the dollar only needs that push down under 75 to complete the wave patterns. Ideal ending points for the dollar is 74.62 and SP500 1,100 to 1,120. Just to reiterate, ideal levels are nice...it does not follow that we have to reach them, we are already within appropriate tolerances.

I would be on guard for a reversal tomorrow...and if a reversal were to occur tomorrow or wednesday - it would most likely be the top of the entire rally...finally.

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