We can be certain that Thursday will bring us an entire day of NBA -- Nothing but Apple (AAPL). But let's not blame it all on that stock.
You probably already know the list of the indicators. But, for a quick review, keep in mind the number of stocks making new highs has still not exceeded the September highs. Moreover, each subsequent higher high in the indices this year has coincided with a lower new-highs reading. That is a negative divergence.
The lower high in the Oscillator is a negative divergence, as well. So is the lower high in the Volume Indicator, and ditto for the failure of the KBW Bank Index or European shares to do anything much after the first few days of the year.
Sentiment-wise, the Investors Intelligence readings are above 50% for bullishness -- typically where we see a high in the market form. The moving average lines of the put-call ratio are all turning up, and the the ISE moving average line rolled over weeks ago -- both bearish signs. In addition, margin debt is high and complacency abounds.
While folks will be fussing over Apple, I am certain they will soon discover the head-and-shoulders top in the Nasdaq that I have shown a few times in the last six weeks. How soon do you think this pattern will get some airtime?
I would ask you not to blame Apple so much but, rather, to expand your world and note that the German Dax has underperformed the S&P 500 since the start of the year. In fact, the ratio has broken an uptrend line that has been in place since last summer, and it has done so decisively. You may think I am picking on the Dax, but the French Cac 40 isn't much better, and it might actually be somewhat worse. That index actually closed lower Wednesday than it did on the first trading day of the year -- yet no one is fretting over Europe anymore.
Then there are the banks and their underperformance. Everyone seems to love this sector at the moment, yet look at the ratio of the KBW Bank Index to the S&P. It hasn't broken down yet, but it is on the verge of this. With that in mind, please look on the left side of the chart and notice what happened when it broke to a lower low in the spring. If you are bullish, you want the banks to hold and perform better -- and, thus far, they have lagged.
Finally, let's discuss the McClellan Summation Index for the Nasdaq, since Apple is a substantial component of that index. As of Wednesday's close, a net differential of negative 700 million shares would halt the rise of the indicator -- and more than that would tilt it down. So keep that in mind if beloved Apple trades lower Thursday. In other words, with all this upside in the market, it won't take much to roll the indicator right over.
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