The volatility last week was wild with earnings that just did not cut it. However, the real shock came when President Obama, due to a republican win in MA and the super majority gone in the senate, was forced to talk of tightening the noose on bank and the future risk they wish to take. Considering these banks like Goldman Sachs Grp. (NYSE: GS) made half their revenue from trading, a high risk venture, this put a major scare in Wall Street. It also sets up a possible war between Wall Street and the administration. Since President Obama took office, he has been a dear friend to the banks and in turn they have scratched his back. However, with a possible war looming, Wall Street is on edge and rightly so. This culminated with a near 600 point drop in the DOW from Wednesday through Friday last week. This week promises to be even more wild with Apple Inc. (NasdaqGS: AAPL) reporting earnings after the bell on Monday and much of the S&P later this week.
While market commentators and analyst try and figure out where the next move is going, I just turn to the charts. Apple is one of the most interesting charts to look at after the dramatic fall in the markets the last few days. The daily chart took out the 20 and 50 moving averages, yet today is getting a solid bounce ahead of earnings. The bounce on Apple is holding just below the 50 moving average. Any technician must be concerned that Apple took out key support in recent days. I know it sounds like blasphemy to question whether or not Apple will have a blowout quarter, however, here I sit wondering just that. Even if they beat earnings, which I do expect them to do solidly, based on the charts, I do not expect the stock to move higher. In fact, I look for a sell off down to a target $190.00.
In addition to all the major earnings releases this week, watch for the FOMC Policy Statement on interest rates on Wednesday afternoon and for the State of the Union Address Wednesday night. As a Chief Market Strategist and trader, this type of market is a dream come true. Learn it and master it.
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Chief Market Strategist