So Are We Getting a Rebound or Not?

 | Jun 13, 2017 | 6:00 AM EDT
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It used to be human nature that when folks saw stocks fall apart (like the technology names did the last few days), they panicked. Now my inbox is filled with "Can we buy them?"

Have folks become conditioned to buying every single one-day decline in technology, or do contrarian calls not work in a trend so strong? I believe it's more the former than the latter. Why? Because despite the chatter, the volatility index for the Nasdaq 100 did in fact get jumpy on Monday, and that means some fear crept into this group. As I have tried to explain, when I look for a VIX to be jumpy, I want it to look like a breakout and then see the reversal in that breakout. I think that is what we saw Monday.

Then there is the volume. For the second consecutive day, volume in the PowerShares QQQ (QQQ) , an ETF to be long the Nasdaq, was over 100 million shares. That is very unusual, and high-volume declines in the QQQ tend to lead to rebounds.

There is also the fact that the ratio of the Russell 2000 to Nasdaq has surged a bit too much for even my taste. Using the ratio of the Russell 2000 ETF (IWM) and QQQ, we can see this ratio has run very far, and if trendlines can be used on ratio charts, there is some resistance here. A near-term pullback should not surprise any of us, and that would mean the QQQ acts better for a day or so.

So yes, all of this adds up to a rebound of sorts. But I ask you to look at the chart of Apple (AAPL) , which by the way is no longer "beloved Apple" because it has been replaced in the "beloved" category by Amazon (AMZN) . It is, however, still well liked. That is quite a breakdown. It also occurred from a lower high. Take a close look and notice that AAPL hasn't made a new high since early May. Also notice that AAPL rather handily took out that May 17 low. That is not good news for Apple fans.

The green area is a support zone, so yes, AAPL should bounce, but a rally to the underside of that broken line is likely the limit for AAPL for now. The stock gave back six weeks of upside in two days and it did so easily. At $90, there were lists of reasons not to like AAPL. I haven't seen those types of lists here at $140. I suspect we will see them at some point, perhaps the next time it swings back down.

Sure, I think we see a rebound in these names. But I also think we're not quite done with the volatility in the market.

For more market analysis from Helene Meisler, sign up for Top Stocks, published five times a week.



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