Three months after AAPL’s “breakout,” it faces its first real test.  As we discussed in August [see: Engineering AAPL’s Breakout] the stock burst out of a long-term rising channel with the aid of several well-timed increases in its stock repurchase program.

Now, it’s time to backtest that mediocre 12%-per-year channel it’s been in since 2010 and embrace its new and improved 36%-per-year channel.A drop to 200 or so wouldn’t do much to dent bulls’ enthusiasm.  Even a likely drop to the SMA200, currently at 192.17, could be passed off as a base-building exercise. One key number in the middle is the open gap remaining at 195.96, a gap which would obviously be closed with a tag on the SMA200 and red channel bottom.All of these scenarios presuppose that, like many of its FAANG cohorts, AAPL will disappoint at least a little. Clearly, the company could turn out some great numbers. But, with the market’s ongoing rally depending on AAPL’s results, anything more than a minor disappointment could do some real damage.

Bears probably shouldn’t get too worked up.  Even if there were a disappointing number of people willing to shell out $1,500 for a fancier way of posting on Instagram or playing Fortnite, the company could always expand their buyback program by another $100-200 billion.

If the SMA200 doesn’t hold, AAPL will have some important decisions to make re buybacks.  The next significant support is way down at 144.48.

Stay tuned.

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The death cross is one of those tried and true technical indicators that often portends big drops.  When a stock’s 50-DMA drops below its 200-DMA, it tends to drop like a rock (unless it’s FB, which uses such crosses to time its buyback announcements.)

I thought it’d be interesting to look at VIX, which has had such an important impact on stocks — especially over the last two years. Previous death crosses (when it’s 50-DMA rises above its 200-DMA) are marked with a yellow arrow, and it’s pretty clear that they have predictably indicated big spikes in VIX — and, big drops in SPX.It’s interesting, then, that as of yesterday’s close the 50-DMA and 200-DMA were both at 15.97.  This morning, the 50-DMA ticked slightly higher — making this the most bearish chart I know of.continued for members… (more…)