ORIGINAL POST:
The dollar is making a stand at the upper end of the target range I charted Friday, but hasn’t yet broken out of the steep falling channel. While there was a turn at the .618 Fib that would justify a .786 completion (a Gartley), the more obvious Point B was at the .382.
In a perfect world, this would signal DX has further downside potential to the .886 for a Bat Pattern completion — though, obviously, not every corrective wave has to be a harmonic pattern.
The EURUSD similarly reached a common turning point at the 1.272 extension of the latest move down from Dec 19 (or Jan 2, take your pick.)
But, as can be seen, the rally from last week features no potential Point B whatsoever. It’s hard to call this a Butterfly Pattern in the absence of an actual pattern.
Furthermore, the tails on the daily candles offer an even more aggressive upper bound for the rising wedge we’ve been charting for the past several weeks.
Equities are pointing to a soft opening, but nowhere near what one would normally expect with horrid AAPL news on the tape — much less the approaching budget showdown.
Regular readers are well aware of the importance of the 500 price level for AAPL. As we’ve discussed many times, the completion of the H&S pattern could have dire consequences for AAPL and the entire market.
continued for members…
We’ve seen a couple of pokes down below the neckline already, but require a close below it for the pattern to be considered complete. It currently stands around 501.
A potential Butterfly pattern is shaping up on the 60-min chart. It points to either the 1.272 at 490.97 or the 1.618 at 473.55. Both are in the vicinity of other meaningful Fib levels and channel lines (yes, AAPL is still in the same channel.)
The RSI shows the current support at 500, and a world of hurt if that support is lost. The question remains: how much support can AAPL receive without blatant manipulation being obvious to all?
TPTB can’t really afford to lose their bell cow for all things bullish. I wonder when the stock buyback program will be announced…
I’ll post an AAPL update later that discusses this and past H&S patterns, and what might lie ahead for the stock.
UPDATE: 10:10 AM
So far, AAPL is hanging in there. And, SPX is dutifully taking its cues — off only 4-5 points.
There’s a potential Crab Pattern completion (in red), but this requires a Point X that feels like a bit of a cheat. But, again, not every move has to be a perfectly constructed harmonic pattern. Just making everyone aware…
While the little rising wedge hasn’t yet broken down, 60-min RSI indicates it should.
The daily RSI shows the four unsuccessful attempts to top the 1474 high, along with the downside potential if the current support (purple mid-line) doesn’t hold.
So, for now, I view this as a double top and remain short.
Regarding our analog…I intended to post some charts this weekend but spent most of the past couple of days on my backside fighting a now 3-week old sinus infection which is, unfortunately, still with me.
As discussed last week, there’s plenty of wiggle room in the timing. The most important aspect as to whether it’s still in play is whether SPX exceeds its former high of 1474.51.
A double top such as we’ve had is obviously in excess of the analogous previous retracements — both 2007 and 2011. But, so was the slide to the .618 (1343 in November) of the 1266 — 1474 rally. In previous tops, that leg amounted to only a .382 or .500 retracement.
Form has obviously taken a back seat in this topping pattern. But, I believe exceeding the previous top would be the breaking point.
UPDATE: 3:15 PM
DELL has been in the headlines today — the subject of LBO rumors.
Why would someone want to dump money into levering up a middle-performing widget company with no distinct competitive advantages? No idea, but the banks certainly have access to cheap (free) money.
If this’ll jump start a comatose segment of their business, that’s all the reason they might need. If there is a way to get this deal done that doesn’t jeopardize their money, they’ll jump on it.
The technical picture on DELL is hardly bullish: trying to retake a channel mid-line it lost in May.
The daily picture is no more promising.
more later…
Comments
7 responses to “Charts I’m Watching: Jan 14, 2013”
Hello PW,
Apple is performing poorly. However, PC makers such as HPQ and DELL are climbing! If you have time, can you provide some info on those? Just now, Dell climbed 14%. And HPQ has climbed more than 20% since this year! Thanks!
Hello PW,
Please don’t take offense for my silly question. There was a talk of Dell going private and its stock jumped 14% or more. Why would going private would equate a higher stock price? (if this is the way to help the stock price, every company would be doing it including Apple)
I’m guessing you’re a little younger than those of us who were around in the 1980’s — the height of the MBO/LBO craze. It would be worth your while to check out the wikipedia article on LBO’s just as a primer: http://en.wikipedia.org/wiki/Leveraged_buyout#1980s
Bottom line, cheap financing makes miracles happen (at least that’s the sales pitch.) It’s essentially financial engineering and was perfected by the Drexel Burnhams and Salomon Bros. of the world.
By taking a company private you might monetize some assets (like excess pension benefits) and even wipe out some liabilities.
Sell off the businesses that aren’t contributing to the stock price, bust a union or two, maybe close some expensive facilities, etc. Expenses down, revenues up…
Once you have the company streamlined and highly leveraged, the ROE looks amazing. If the stock market has cooperated and multiples are high, you can make huge returns by launching the company as an IPO, etc.
It’s a rather wasteful exercise that costs society and many stakeholders, but can be hugely profitable for the insiders.
Thanks PW. I am not young but I was in school when LBO were taking place. If Dell is such as successful speculation, can we do that on HPQ? Dell and HPQ are basically in the same boat. (I know this is not an investment advice) Is it a good idea to invest in HPQ to expect a similar LBO deal? It is for discussion purpose only. Thanks!
HPQ was obviously up today because of the DELL news. But, I can think of a LOT of other companies I’d rather LBO than either of these companies.
I see nothing especially compelling about HPQ, which has been a laggard with poor leadership for years. Personally, I wouldn’t chase it, and would probably look to sell on this strength it if I were long.
Check out the recent analyst action — all downgrades: http://finance.yahoo.com/q/ao?s=HPQ+Analyst+Opinion
Thanks PW. I hope I don’t create an impression as a speculator. However, it is really difficult to invest/speculate these days. If someone is bullish on stocks and long on SPX, there is a big risk of SPX breakdown. If someone is bearish and short on SPX, there is a also threat of SPX breakout. (Your SPX charts point out two possible D values of SPX representing a breakdown or breakout). As a result, I am thinking of the third alternative in addition to long and short. What happened to Dell today gave me some ideas. A gain of 14% in one day! Consider if someone shorts SPX from 1472 and cover at 1290 in an ideal case when analoy plays out, it is a gain of 12,3%. The one day gain in Dell exceeds that. I thought maybe it was what I was looking for. But it is probably not going to work because there are too many variables. Thank you regardless.
Hey, whatever works… HPQ could very well ramp up another 10-20% or more.
I used to manage M&A risk arb money, and I saw plenty of instances where similar companies moved in sympathy to the one in play. I’ve done no research on either company, so can’t opine as to what the values are.
I CAN say, however, that there are 14% gains and losses every day in the markets. But, trying to guess which ones might work out isn’t an investment “strategy” I’d hang my hat on.
There are many professional investors who are much more knowledgeable than you and I about HPQ. They say the stock is worth only $17 ($15 before the news leaked out.)
What I try to do each day is follow a process which, although we’ll rarely see daily swings over 5%, I consider more predictable and repeatable.