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Apple, the one thin reed still holding this joke of a market together before it completely collapses, has undergone an important change in recent weeks. You see, for almost a decade, it reliably banged within that large channel you see below, and at one point, the tidal wave of free Fed money became so overwhelming, it blasted above this channel and formed a smaller, higher one.
As gas prices here in the Bay Area approach $7 per gallon, it is clear that energy is at record high levels. Here we see my entire history of the continuous contract for crude oil:
I was disappointed to see SPX close well below the main support and resistance trendline on Friday (Editor’s Note: Why? Why on Earth?) . This has only happened twice since the start of 2009, and on both occasions SPX followed through the break with force. Two instances is somewhat less than a statistically significant sample, but further downside is now undoubtedly open, even if the bull flag setups on many indices, sector ETFs and stocks are still intact.
SPX weekly chart:
It would be easy for make an argument for either side at this point. For the bulls, one could argue that the market is deeply oversold and long overdue for a powerful counter-trend rally. For the bears, one could argue that the topping pattern is nowhere even close to having expressed itself to the downside and that, rally risk be damned, the broad trend is going to be lower. Just like last weekend, I am facing the new week with apprehension and anticipation. Here is the weekly chart of the /ES to show the muddled state we are all in:
After the low last week very decent quality IHS patterns formed on SPX, NDX, IWM and Dow and broke up this week. They all failed, setting up targets at the retest of last week’s lows, which would generally all be reached, so the fact that only Dow has delivered that retest so far tells us that there may well be unfinished business below.
The question here is whether the impressive collection of bull flags that have formed from the all time highs on many indices and stocks are going to deliver, and equities are still in the inflection point where that decision is being made.
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