The technical action is fairly weak right now, and a disappointment from the world's biggest stock could be a very bad sign for the markets in the short term. MoneyShow's Tom Aspray highlights the events and key levels to watch, and explains where he may see possible buying opportunities next week.
Stocks finished the week on a negative note, as Thursday’s early release of Google (GOOG) earnings and the anniversary of the 1987 crash weighed on traders. It gave investors another reason not to buy. The major averages were lower for the week, and are now negative for the month.
Precious metals dropped Friday, and have been correcting steadily from the early October highs. The high level of bullish sentiment last week made me nervous, but the technical action suggests we may get a good buying opportunity by the end of the month.
This Thursday, we get the latest earnings from Apple (AAPL). As you may recall, they disappointed the market last quarter, and the stock lost 5% even though earnings were up sharply from a year earlier.
At the time, Apple also lowered expectations for the fourth quarter. The stock made its low at $570 two days after the report, then hit a high last month of $705.07. This was not far below my target from late August, “in the $709 to $722 area.”
Apple’s correction from the highs has been sharper than I anticipated, but it has not changed the positive intermediate–term view. The weekly chart shows that prices are already near the lower weekly Starc– band, which is at $605.40 this week.
The weekly relative performance analysis did confirm the recent highs (line a), and while it is below its WMA, it is well above the longer–term uptrend (line b). The OBV made significant new highs last month, and the March highs were clearly exceeded. The OBV is below its WMA, but above the recent lows and the uptrend (line c).
Therefore, if the earnings disappoint the market and AAPL drops further, it should be a buying opportunity. (For specifics, see Don't Give Up on Apple or Tech.)
The economic data has been improving overall for the past few weeks, and last week there were several encouraging reports. Both retail sales and industrial production were better than most analysts expected, while the leading indicators jumped an impressive 0.6% in September. It therefore is not warning of a new recession on the horizon, and their coincident index points toward ongoing economic growth.
Housing starts beat estimates by over 100,000, and this chart confirms that they clearly have bottomed after completing a nice base in late 2011. Existing home sales were lower on Friday, as the increased demand has reduced the inventory. The chart of existing home sales does appears to have bottomed, as it has broken out of its base formation.
The rise in building permits also helped boost the LEI, and the Philadelphia Fed Survey had the first positive reading since April.
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