“Been down, isn’t it a pity” – Summer in the City, The Lovin’ Spoonful
“The cherry on top or AAPL on top of this banana boat, AAPL shows a possible Charlie’s Angels sell setup.
This is close 3 Topping Tails. AAPL hasn’t tested its rising 20 day moving average since the March low.
The 20 day currently resides at 375. Trouble is, it’s been so long since the 20 day has been tested that it might cave. And a failure below the 20 day will also coincide with a Rule of 4 Sell signal, a break of a 3 point trendline from mid-May.”
As king of the big caps, AAPL defines the Death of Discernment in the markets.
In other words, it is the most owned stock in every ETF. It has to be by virtue of its size.
Money comes in to the passive, systematic, sedated trade and the money flows directly into stocks without any regard as to value.
The question of the ages is whether there is anything that will cause the “Passives” to sell?
With the Passive Trade dominant in the market and obliterating active money managers, who will be on the other side of the trade if and when a day of redemption comes.
My information is that March didn’t even see selling in the Passive Trade — they just stopped buying.
So that gives you an idea of what the sell might look like.
So let’s take a look at AAPL’s position here.
AAPL struck its 20 day moving average at 377 mid-session Thursday, bounced and then waterfalled to 368.
The following daily shows AAPL not only snapped a trendline from mid-May but also a trendline deigning the entire advance from the March lows.
The dual breakage was too much to expect the 20 day moving average to hold.
Interestingly on Wednesday, AAPL was stretched 40 points above its 50 day line…precisely the same distance it was from its 50 day line at its January 29 high.
Notably, AAPL’s January top remained intact as the SPX and NAZ went on to strike new highs in February.
The divergence was a blaring signal of the March crash.
Was AAPL discounting vulnerability based on its manufacturing and sales in China?
On February 24, AAPL led the way down with a Breakaway Gap below its 50 day moving average.
It would drop 100 points in 20 trading days.
Currently AAPL’s 50 day moving average resides at 350.
This is 21 points below Thursday’s close.
As a pawn in the cold war between China and the U.S., is AAPL telegraphing another plunge below its 50 day line?
There is no way to know how AAPL will react.
What I do know is what the geometry of its price structure says according to the Principle of Squares, which is the conceptually correct way to measure price as it progresses in its natural logarithmic spiral.
The Principle of Squares is represented by the Square of 9 Wheel, which is so called because the first square ends with the number 9, which is 3 squared.
Legendary trader W.D. Gann wrote that when price squares out, expect a change in trend.
“My calculations are based on the cycle theory and on mathematical sequences.” W.D. Gann
First let’s take a look at AAPL’s January to March 328 to 213 drop.
The red arrow is 328, the Jan high with the next “square” down at 259 representing a 360 degree decline or 1 full price cycle.
AAPL crashed to 256 on February 28 with a massive 22 point short term selling climax.
This tied to a 360 degree drop off the high from which a violent rebound to 304 played out in 2 days.
So AAPL jackknifed 48 points in 2 days following a 360 degree decline.
You think the markets are random?
On Friday, March 20, AAPL dropped precisely to 228 (purple)
228 is straight across and opposite the 328 high.
228 represents a 360 degree plus a 180 degree decline, a total of 540 degrees.
540 degrees is very important geometrically, which we’re not going to go into right here.
On Monday, AAPL declined precisely another 90 degrees to 213 (green) where it left a Selling Climax, reversing to leave Bottoming Tail, closing near the top of the day’s range.
This is a good example of how knowing the geometry and Livermore’s Line of Least Resistance of one stock like the back of your hand can put you on the right side of the market.
Patterns in markets tend to repeat. While stocks sometimes make V Bottoms, they typically carve out a primary high and a secondary high at tops.
TSLA has been the poster child for speculative sentiment this year.
Let’s take a look at its PA (price action).
The following TSLA daily shows a Climax Run into its February 4 high.
A sharp pullback saw was followed by a secondary high.
When TSLA broke its rising trendline in tandem with its 20 day moving average on February 27, it waterfalled.
Currently TSLA has traced out what may be a fractal of its February top.
It shows a Climax Run and a signal bar reversal followed by a lower test high.
TSLA has room to decline down to its 20 day moving average at 1400, which ties to the top of a rising trend channel.
However, below 1400 implies a drop to 1100 and the 50 day moving average, which ties to the lower rail of the aforesaid trend channel.
Summary. There are two ways to determine the position of the market, by the indexes and the leaders.
As the heart and soul of the advance off the March low, Thursday’s large range declines in AAPL and TSLA warrant caution.
