Does Apple’s (AAPL) Death Cross Really Matter?

Is Apple's Death Cross a signal that it's time to short? John Lansing explains

   

Video Transcript

I wanted to cover what we call the “Death Cross.” The Death Cross that could possibly be happening on Apple’s (NASDAQ:AAPL) daily chart is gaining a little bit more attention even though anyone who’s followed me knows that I have talked about the Death Cross happening on the monthly chart of the S&P 500 for the past couple months.

I’ve said it was something that, as we got closer toward the end of the year and the first part of 2013, that we’d start seeing on the monthly charts. But in the meantime, let’s see where we’re at within technology because that’s clearly front-running from a daily perspective.

To give you a little bit of a reminder of how this pattern works, I’m going to take the daily chart of the PowerShares QQQ Trust (NASDAQ:QQQ), essentially the NASDAQ ETF, and I’ll put on the 50-day simple moving average and the 200-day simple moving average. The red line shown on the chart in the video is the 200-day, and the blue line is the 50-day because this is a daily chart.

As you can see on the chart in the video, they’re both getting closer and closer to where they’re approaching a “kiss,” and it’s when they touch in that little smooch, if the blue 50-day line undercuts the red 200-day line, then you have what happened back in 2011.

Keep in mind, this is not a chart pattern that’s a leading indicator. It, more or less, tells you what you already knew in advance: that bad things are about to happen.

Now, on the daily chart, it’s not nearly as significant as what I’ve shown you what could happen on the monthly chart with the QQQs because if you take a look at the last time this happened in August 2011, when the QQQ had the Death Cross, it occurred after the lows were already in. I show you where it occurred on the chart in the middle of August while the actual low for the QQQs in 2011 at the $49.35 mark had already occurred.

So, by taking a bearish stance after the Death Cross on the daily chart would have been not such a good idea because it happened after the lows were already in, which sometimes does happen on daily charts when you’re talking about the Death Cross.

So, it’s not really that significant looking at the last time this happened. The last time this happened, the lows were already in. We had the Death Cross, then, by the end of the year – actually one year ago this week – we had the Golden Cross, which is the bullish signal. That’s when the blue 50-day line cuts above the red 200-day line, and then you have a rally, even though we’ve had vicious corrections within the rally that were equal, that I show you on the chart.

InvestorPlace advisor John Lansing tracks the charts all day and offers expert technical analysis in his day trading, options and trading services: Power Trading at the Open, Parabolic Options and Trending123.  For more information on which service is for you click here.


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