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Market Stalls Midweek

Several factors nickel-and-dimed their way to a market decline Wednesday


Stocks continued to roll over on Wednesday, unable to hold onto some early gains. There was no specific driver for the pullback, though most of the focus seemed to be on the market’s continued struggles with the idea that the Federal Reserve plans to start winding down its quantitative easing program as soon as mid-summer.

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The sense of foreboding was exacerbated by a lack of any new economic data or commentary from Fed governors. Instead, there was a batch of articles highlighting the outsized impact of rate volatility on emerging markets, along with more reports debating the impact of a higher-rate environment on the economic recovery. None of the new reports broke any new ground, however.

As you can see in the chart , the S&P 500 has come back to test its 50-day average at the purple line, just as it did on Thursday of last week. That Thursday low must hold, or the evidence will be plain that bulls have stepped away from the market and let bears take the sort of full turn that they had in October and November last year, seen at the far left of the chart.

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Interestingly, that autumn decline was led by disappointed investors selling Apple (AAPL), and the consumer-electronics giant is actually rolling over now much the same way it did then.

As you can see in the second chart, Apple fell 1.2% Wednesday after making sort of a “hump” higher in May and June, much as it had in November of last year. That pattern broke down last year in a big way, with the stock falling another $100 quite rapidly.

I would not be surprised to see that happen again this year, with the shares slipping into the mid-$300s by September following disappointment over the path laid out in its developers conference earlier in the week. Afterwards, there were a lot of apologists out in force on the Internet who said that the company was reinventing the desktop and had major improvements to iOS 7. They pointed to the applause that the company received from its developers as evidence. But I am afraid that they are going to be very disappointed again. Bulls must push over $450 very soon and stay there to prove that they mean business.

From a technical perspective, this week did bring a confluence of cycle dates. Sometimes these confluences of cycles can be positive, and sometimes negative. This one seems to be having a restrictive effects on market participants’ emotions; if they are strong enough, they can last for weeks or months, much like annual seasons.

InvestorPlace advisor Jon Markman operates the investment firm Markman Capital Insight. He also writes a daily swing trading newsletter, Trader’s Advantage, which aims to capture profits of 15% to 40% and often as much at 100% to 200% in less than 90 days. 

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