Last Friday we wrote a report, The AAPL doesn't Fall Far From the Market Tree where we warned a Triangle Pendulum sell signal in AAPL indicated the January breakout over a 2 month consolidation was a false move…for AAPL and that the market would probably follow suit.
Fast moves come from false moves.
AAPL's Triangle Pendulum sell signal coincided with a large range break below its 50 day line leaving an Expansion Pivot sell signal as well.
Likewise last Friday's rip to a time/price square-out on our Square of 9 Wheel with 2972 opposing January 26th was a false slap in the face of a red XIV that hadn't made a new high since mid-January.
The ensuing action in the SPX since last Friday's ramp underscores the idea that fast moves come from false moves.
Tuesday's Breakaway Gap was the nail in the coffin with the index hanging fire above its 20 day line which is being tested just a week later.
The quick 100 point SPX decline we anticipated on Monday morning's report is playing out with the SPX eyeing 2766.
This is 180 degrees down from the 2872 high.
Now that the 90 degree level at 2818 has been violated with authority on this morning's gap it looks like 2766 is on the table.
2766 ties closely to a 50% retrace of the January advance at 2777.
That said, the SPX has turned its Weekly Swing Chart down today and unless a miracle happens will carve out weekly Train Tracks.
Bounce or no bounce next week this puts the defense on the field.
What gave us confidence that a rout was in order was:
1) Extreme sentiment
2) The SPX was historically stretched from its 50 day moving average.
3) 2 year cycle flagged last week indicated the potential for a mirror image 8% quick decline which was the intervening rally between the January and February 2016 W Bottom.
But above all, it was the how the January 26/2782 square-out was rejected that sealed the deal on our position that stocks were headed down.
In my experience when an item hits a square-out like a brick wall, it is talking.
That and the fact that AAPL is the eye of the market and is owned in over 370 ETF's indicated that the other side of the virtuous circle of passive investing was about to get a gut check.
Last night AAPL bounced 5 points. That false move with AAPL down 5 points from the pre-earnings close is eliciting a fast move across the board.
Position in AAPL