AAPL stock blew out earnings estimates and gave an impressive earnings release. There is no denying the power of that stock, but its gains failed to lift the market for a second straight day. Volume dried up across the board, excluding AAPL from the mix. The action in many stocks have become troubling and today we saw some nasty reversals like VMW leading us to believe this rally is being sold into and not bought. AAPL too reversed from its gap this morning giving pause to could the stock actually have topped? (Hate comments are to be expected) While the indexes still remain somewhat ok, the action in leaders is not inspiring.
We have been talking about the right side of the most recent bases and how volume has really been anemic. Wedging as we like to refer to a rising stock price on lower volume and it simply means demand for the stock is waning. We have seen in the past this situation, but it has become increasingly NOTICEABLE. Earnings are one thing, but we sell on the technicals. Fundamentals are used in the buying decision and not the sell decision. Remember in November of 2007 when those fundamentals looked so darn good? Selling on technicals left you with plenty of cash on hand to use in 2009 and not to mention a huge leg up on the market.
Today’s last hour was filled with wild swings, but the key was the inability for the market to find buyers. The most recent rally did clear out any oversold conditions that existed and there is a possibility we could still work our way higher here. If underlying stocks, our market leaders were acting better it would be much easier to say we are going higher. However, without those leading stocks this action will only amount to churning. The prudent action here is not to get caught up in the churning.
Cut your losses short and stay nimble
