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Apple Looks Vulnerable to Another Sell-off

Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter here.

Monday’s low-volume bounce in the broader U.S. equity market doesn’t offer all that much to analyze in and of itself, yet bearish clues from across the pond are worth making note of, as is some more possible trouble ahead for Apple (NASDAQ:AAPL).

On both sides of the pond, to a good extent investors are now waiting for earnings season to begin before reading more into the state of the domestic and global economy. However, the earnings calendar this week is relatively light as most bellwethers/market movers don’t start reporting until next week, when things really kick into high gear. The numbers I will be looking at this week are those from JPMorgan Chase (NYSE:JPM) and Wells Fargo (NYSE:WFC), both due to report on Friday.

Instead of the usual daily chart of the S&P 500, we’re going to mix it up today and look at a 60-minute chart dating back to mid-February. The parallel blue lines represent the uptrending channel off the November lows, which I also pointed out yesterday.

Note that on Friday, following the March employment report disappointment, the index bounced not coincidentally to the November uptrend line. With Monday’s follow-through buying, the S&P 500 is now a whopping 10 handles off the 2013 highs, something that the bears don’t like to hear.

SPX Chart
Click to Enlarge

Meanwhile, in Europe, both the Euro Stoxx 50 and Germany’s DAX 30 (shown below) snapped their June uptrend lines last week, but unlike their U.S. counterparts, showed no willingness to bounce yesterday.

How long can Europe continue to show negative divergence versus the United States without weakening the chart of the S&P 500? Likely not much longer, yet I would be remiss not to remind ye faithful that price remains the ultimate and only arbiter.

DAX Chart
Click to Enlarge

Back to the state-side charts, in addition to weak semiconductors, transports and small caps, both the industrial and materials sectors (shown below) snapped their November 2012 uptrends last week.

With Friday’s reversal and yesterday’s follow-through buying, as long as these simple uptrend lines are not meaningfully overtaken again, we can still operate with a bearish posture. The coming days will likely offer resolution to the bull/bear fight as investors either chase ’em higher or take profits on the back of earnings announcements.

Sector Chart
Click to Enlarge

Last but not least, allow me to say a couple of words about the chart of Apple. As it often goes with cult stocks, finding a bottom takes time for the simple fact that sellers are aplenty on any bounce. Hopeful institutional investors having bought the stock north of the $600 mark and not yet sold are antsy to get out of their positions, keeping a lid on the stock for the time being. From a pure price action point of view, AAPL looks weak and vulnerable to slice below $400.

AAPL Chart
Click to Enlarge

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.

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