The Excitement Continues

In retrospect, this might have been a good week to go on vacation, commit the Dewey Decimal system to memory, heck…even schedule a colonoscopy.  Anything would be more exciting than the water torture of watching this market go nowhere and do nothing.

We all know there’s a fiscal showdown coming.  We know it could get ugly.  We also know the consequences of a failure could be enormous, while the consequences of success…well, is there really any point to discussing it?

Any outcome that doesn’t involve an actual default (that lasts more than a day), human sacrifice, dogs and cats living together and mass hysteria will be hailed as a great victory for our democrapitalist system.

The Fed will celebrate by setting the discount rate at -2.5% and buying all remaining government debt.  Lobbyists will be given their own monument on the mall (come to think of it, they already have one called the Capitol Building.)  And, banks will be given a tax credit for every homeowner they evict (delinquent or not) as long as they provide a toaster to each newly homeless family.

The income tax system will be greatly simplified. The new 1040 will take only seconds to complete, a “giveaway” for individual taxpayers.

While, large corporations will continue to be burdened by excessive and unnecessary regulations as well as grossly unfair tax rates.  The only exceptions will be a select few which qualify for the Congressionally Recommended Assistance Program (C.R.A.P.), including those which:

  1. are able to evade taxation in other jurisdictions
  2. employ an accountant
  3. have donated to a Congressman
  4. might otherwise owe taxes
  5. believe taxes are for Muppets
  6. don’t really feel like paying taxes

Healthcare will be free for all, but office visits will require the donation of a body part.  Social Security benefits will be increased, but will require the conscription of one’s offspring in the volunteer military which, by then, will surely have preemptively attacked Iran (in a bid for energy independence, America will annex OPEC.)  And, of course, new SEC regulations will prohibit the selling of stocks.

Okay, maybe I’m exaggerating.  When was the last time a bank gave away a toaster?

*  *  *  *  *  *  *  *

AAPL, the subject of much navel gazing lately, rebounded where we expected it to [see: AAPL: Flirting with Disaster.]

Yesterday’s question du jour was where the stock would rebound to:

If AAPL back tests to 501 [the H&S neckline] and continues down, SPX should follow.  If, however, AAPL blows through 501, it increases the odds of new highs for SPX.

This morning, AAPL did poke up beyond the former neckline, reaching 504.50 just a little while ago.  It’s clearly threatening to go higher, and has plenty of room within the white channel — the upper bound of which is 533.  It remains to be seen whether or not the neckline will hold.

The RSI chart, besides showing no positive divergence, shows the resistance that must first be overcome.  While the purple and falling white channels show plenty of downside potential, the upside would require a break of the rising white channel bottom.

UPDATE:  1:35 PM

Nice comment from Beach Justice below, comparing the price action from last September to that of the past two weeks.  Seeing them side by side on a graph, the similarities are obvious.

The shaded box from September incorporates the 1426 high leading into the pattern, the interim low at 1396, and the ultimate high at 1474.  The entire pattern took 17 sessions to complete and is a Crab Pattern (white) that coincides with the Bat Pattern completion of the 1576 – 666 crash (purple.)

The shaded box on the right is the same size, meaning it ranges from 1398.11 to 1476.06 over the course of 17 sessions.  Like the September pattern, it has run out of steam (so far) at the 1472.43 Fib.  But, unlike the September pattern, it’s come up a few points (4.87, to be exact) shy of completing a Crab Pattern.

Interestingly, both patterns are about the same size from top to bottom.  September’s ranged from 1396.56 to 1474.51 for a total height of 77.95.  The current one has stretched from 1398.11 to 1473.96 (so far) for a total of 75.85.

Interestingly, if the Sep 14 rally had stopped on a dime at the .886 of 1472.43, its size would have also been 75.85 — exactly the same as the current top (as of a few minutes ago.)

The current top certainly qualifies as a double-top, with a high 55 cents shy of September’s high.  But, what happens from here?  This is where it gets really interesting.

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