On Friday, stocks closed lower, ending a three-week winning streak for the S&P 500 and Dow industrials. Apple (NASDAQ:AAPL), down 3.76% for the day, led the technology sector and the Nasdaq lower for the second consecutive week as analysts cut forecasts for the company’s 2013 earnings. The fiscal cliff weighed heavy on Friday’s results despite better-than-expected November industrial production. And capacity utilization was also better than expected.
At Friday’s close, the Dow Jones Industrial Average was off 35 points at 13,135, the S&P 500 fell 6 points to 1,414, and the Nasdaq was down 21 points to 2,971. The NYSE traded 672 million shares and the Nasdaq crossed 392 million. Decliners were slightly ahead of advancers on both exchanges.
Apple’s 3.9% weighting in the S&P 500 drove that most widely followed index through its 50-day moving average at 1,415 and the stubborn support line at 1,419 drawn from the April 2 closing high. The stochastic indicator flashed a sell signal, which could drive the index to its next support at the 200-day moving average at 1,387.
As noted many times, the Nasdaq was the leader up for most of the year, but it now looks like the leader down. On Friday, it turned down from the bearish resistance line (red dashes) drawn from its September high, and it failed to be supported at either its 50-day or 200-day moving averages, and the stochastic flashed a sell signal.
Its next support is at the fragile December low at 2,958, and a penetration there would set a lower low and result in a major warning that its intermediate trend is threatened.
Conclusion: The technology sector, led by Apple, is becoming dangerously weak and its influence on other sectors poses a serious threat to the broader market’s uptrend. The Dow (see Thursday’s chart) does not appear to be in as much danger of a break lower as the S&P 500 and Nasdaq, but even the Dow posted an intraday low of 13,118, which is uncomfortably close to its 200-day moving average at 12,940. Additionally, it posted a Collins-Bollinger Reversal (CBR) sell signal on Wednesday.
The two major factors influencing U.S. stock prices are the fiscal cliff negotiations and the ability of Apple to establish a consolidation. As the year grinds to a close, a Santa rally looks as much in doubt as the resolution of taxes and spending cuts from Washington. But the recent news is that House Speaker John Boehner has proposed a tax-rate increase, and the president has agreed to significant cuts in spending.
As for Apple, Chinese sources say that the iPhone 5 is not doing as well as iPhone 4S. It is time to take a more defensive posture. See the Trade of the Day.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.