It’s All About Apple… Right?

The parade is ready to start based on the earnings from Apple. The headlines are full of, “I told you so’s”, and investors who sold are ready to buy. The worry over a missed quarter from the tech barometer had pushed the sector below support. Now it will bounce with the euphoria of child on Christmas morning. The quesiton that will have to be answered… is the pop higher sustainable? The chart below of the NASDAQ index shows my view on the situation near term. The damage done to this point can be reveresed, but it will take more than Apple eanrings to right the ship. It is a market of stocks, not a stock (Apple) market.

The downtrend off the April high is in play. The break of the 50 DMA was a negative earlier this week and it is currently 3014. There is the short term cross of the 10 DMA below the 30 DMA to deal with as well relative to momentum. The current 49 point gain in the pre-market will put the index right at resistance of the 3000 level. If will fill the gap down on Monday and put the index back in position to reverse the micro downtrend in play. Thus, the news from Apple will help put things back in order for the buyers. However, it doesn’t change the current issues with the index. That will take more positive news and a extended push from buyers.

That said, how do we play the current move in our portfolio? You have to proceed with the same bias that put the index at 2960. One stock will not change the momentum unless there is support from majority and the economy, etc. A move above 3000 brings 3055 into play and then 3130 or the April high. Those are trading opportunities on the upside relative to the index. If you like trading momentum they are definitely in play on the news. You still have to have a disciplined strategy to capture the momentum.

Looking at the NASDAQ 100 index the picture isn’t much different. The 50 DMA is 2678 and resistance is 2675. 2735 is the likely target move on the news, and then the April highs near 2790. If you want to play the Apple momentum the QQQ trade or NASDAQ 100 has a heavier weighting exposure to the stock. $65.80 is the potential opening level based on the futures (resistance). $67 would be the target on the bounce and $68.40 the April high.

If resistance holds $26.02 on PSQ, ProShares Short QQQ ETF would be interesting or $25.75 as an entry point to play the downside momentu. This is the play I am watching. Not as a belief that Apple won’t move higher, but as a belief the other 99 stocks or some percentage of them will pull the market lower and test support versus hitting against resistance at the previous high. That is my belief… thus, it all has to play out in order for me to take any trades on the short side of the index.

What about Apple? $600 is resistance and the stock is poised to open near that level. A move above it and holding into the close today would be a positive. If I owned the stock, I would look to take some of my position off the table and see how it plays out from here. Being that the drop from $640 to $560 hit our stops, we don’t own the stock and I am not looking to buy it back at this point.

As for the rest of Wednesday there are other events taking place. Durable goods orders are expected to decline 3% and the Bernanke report is due at 2:15. Both are important to investors, they may be overshadowed by the Apple cloud, but watch what they say relative to the economic picture. Apple may help investors swallow Bernanke’s blathering better.

The promises to be an interesting day. Use the bounce to deal with the laggards in your portfolio and do some spring cleaning if you have not already done so. Adjust your stops and manage the risk.