Tuesday, April 24, 2012

AAPL blows away expectations again & a long term perspective

Apple reported its second quarter earnings this afternoon and its profit jumped 94% this quarter.   The stock popped $40.00/share in after hours trading.  The entire NASDAQ had been languishing due to the concerns many had concerning the stock and its massive capitalization which literally drives the index.  No doubt the entire market will rally tomorrow on the news.  Apple is no longer acting like a stock; it's acting like a commodity!

I like to step back once in awhile and take a (very) long term view of the market.  It can assist those who are active in the market by placing the daily and weekly price action into greater perspective. 

I've written much in the past few months on how central banks are pushing on a string in their efforts to mask the global deflationary forces that are still with us until somehow nations can de-leverage.  And I believe I've posted some very convincing charts to prove my thesis. 

And I wouldn't want my readers to think that they cannot succeed in their efforts.  I've progressed (some of my gold bug friends would suggest regressed) from a "gold standard" proponent to one who believes there can't be a perfect monetary system.  I've come to recognize the limitations of a gold standard and also a credit based economy. 

I say all this to say that I'm technically focused on these markets.  I don't care what the "gurus" are saying on Bloomberg or CNBC, I let the charts tell me where these markets are going.  As long as you know how to read them they'll never steer you wrong. 

Here's a monthly line chart of the S&P 500 going back to 1981.  I don't even want to tell you what I was doing back in 1981 :-)

(click on chart for larger image)
Folks, you are looking at the great bull market that started in 1982 and ended with the dot.com crash of 2000-2003.  I've drawn a trend line from the market top in 1987 just prior to the famous "1987 Crash" to where we closed today which I highlighted with a circle.  Some may make the case that we are looking at a possible "head and shoulders" top or, at the least, a double top.  I won't speculate on those formations although the double top seems more plausible.  But I will say this as a technician:  The S&P needs to take out that blue dashed trend line.  So far, it's been turned away as it was in 2011 (red arrow).  I've also highlighted a divergence on the MACD indicator which might be telling us something about the long term momentum of this market.

Now, just consider that this is a Monthly chart.  Forming market tops can take months.  It can be likened to trying to turn the Titanic.  It's not turning "on a dime".

I'll be posting more long term charts from time to time to assist my readers in gaining a grand perspective.  But for now, the FOMC wraps up their two day meeting tomorrow with a formal announcement at 12:30PM EST followed at 2:30PM EST with a Bernanke press conference.  Don't expect any earth shattering announcements and my bet is that no matter what Ben says tomorrow, stocks will rally due to exuberance over Apple.