Bears are on the Prowl and Apple is on the Hot Seat
Bears are on the prowl and Apple (NASDAQ:AAPL) could sink the world.
It was a bad week for global equities as troubling news jumped out like a bogeyman from a dark closet in the fun house of nightmares that global financial markets have become.
Bears are on the prowl, Europe burns, and Apple Inc. (NASDAQ:AAPL), darling of hedge funds and individual investors, alike, could sink the world.
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However, great danger always brings the concurrent potential for great opportunity.
On My Wall Street Radar
In the chart above, we can see how supply gained control this week as the last column is now “Os.”
Recent highs of 1420 remain significant resistance while current levels of 1369 indicate the last level of support before a “sell” signal is generated for the S&P 500 (NYSEARCA:SPY)
For the week, the Dow Jones Industrial Average (NYSEARCA:DIA) dropped 1.4%, the Nasdaq Composite (NYSEARCA:QQQ) declined 3.7%, the S&P 500 (NYSEARCA:SPY) gave up 2.4% and the Russell 2000 (NYSEARCA:IWM) shed 4.1% from last Friday’s close.
The broad markets remain on the brink of significant moves lower, however, Apple Computer (NASDAQ:AAPL) paints an even more troubling picture.
In this chart of Apple Computer (NASDAQ:AAPL) we can see how the S&P 500′s largest company has shed approximately 12% over the last month.
However, this recent decline still leaves the storied stock more than 25% above its lows in late January.
A closer look indicates that the stock has broken its 50 day moving average, indicating short term weakness, and also MACD is on a “sell” signal as short term momentum weakens.
The clarity of point and figure charting paints an even more sobering picture as we see that Apple (NASDAQ:AAPL) has generated a “sell” signal with a down side price objective of $505, some 10% below current levels.
Of course, Apple (NYSEARCA:AAPL) is only one stock, or is it? Since the company makes up approximately 10% of the NASDAQ Index and 4% of S&P 500 earnings and is a major holding of many institutions and hedge funds, it certainly bears closer watching than the average stock quote. By itself, Apple sales exceed the GDP of more than 160 nations and so the company’s earnings throw around an excess amount of influence on world stock prices.
A sell signal in Apple (NYSEARCA:AAPL) is a significant warning sign, not only for the NASDAQ but for the S&P 500, as well.
The Economic View Fro 35,000 Feet
Last week’s positive news was skimpy as jobless claims improved and beat expectations while the ISM report unexpectedly climbed.
Overseas, Spanish and Italian bonds stayed under control, with yields dropping in spite of a never ending stream of bad news from Europe.
On the downside, Friday’s Non Farm Payrolls report was a disaster with only 115,000 new jobs being created as opposed to the previous month’s 154,000, and labor participation rates are at 3o year lows. Retail sales year over year posted a wide miss in expectations while the ISM services index declined to 53.5 from last month’s 56.0.
Europe continued generating bad news with a composite PMI of 46.7 for April, down from 49.1 in April, missing expectations and indicating acceleration of the recession in Europe. Unemployment spiked across Europe to average 10.9%, a 15 year high, while Spain is in depression era unemployment territory with 1 in 4 people, 25%, unemployed.
Pivotal elections on Sunday, May 6, 2012, have the potential to destabilize Europe as opposition forces to austerity make a push in Greece and France. Early exit polls on Sunday indicate that an anti-austerity wave is sweeping the ballot boxes in Greece.
Europe slips deeper into recession with major countries like Denmark, Greece, Ireland, Italy, Spain, Portugal, Netherlands and Britain reporting two consecutive quarters of economic decline.
Next week’s economic reports won’t carry the weight we saw this week, however, notable reports include Monday’s Consumer Credit, Tuesday’s NFIB Small Business Index and March Job Openings. Wednesday brings wholesale inventories while Thursday sees weekly unemployment claims and Trade Deficit reports. Friday could be significant with producer and consumer price indexes and the University of Michigan Consumer Sentiment report.
However, the week’s big news happens on Sunday with elections in France and Greece that could further upset the tenuous situation on the Continent.
Bottom line: Bears are on the prowl, Europe remains a wild card and Apple could fall from the tree with global financial and economic repercussions.
John Nyaradi is the author of The ETF Investing Premium Newsletter.