Apple’s dilemma will ultimately become the dilemma for the broad stock market. At some point a top will be put in place, probably sooner than later, and each of the cycles we follow will begin to give way on the downside. First the short-term trend will break, then the intermediate, and finally the long-term. The fact that market pricing appears to be in a defiant mode to the extent prices keep rising in the face of weak indicator confirmation is only a matter of market semantics. In fact, we are going to contradict ourselves here by saying that, “Yes, what goes up must eventually come down.” Our proof? AAPL. In fact, AAPL could be leading the market.
McCurtain Most Actives Advance/Decline Line (MAAD)
Daily MAAD perked to new short-term high Friday, but strength in indicator since December 28 S&P short-term lows has not equaled first leg up in MAAD after November 16 intermediate low and bottom of first short-term low. What that variance suggests is that the move up in S&P 500 over past month has been inferior in quality to first part of intermediate-term rally. While that observation would seem to be at variance with obvious market strength, it is the point at which the majority thinks prices will continue higher that indicators at odds with pricing take on greater importance.
Admittedly, our Weekly MAAD series has demonstrated increasing strength over the past couple of weeks by moving above resistance at the September highs, then the March 2012 indicator highs. But the spring 2011 peak has yet to be overcome, nor the downtrend stretching back to the spring of 1999. Given the proximity of index pricing to the 2007 highs, pricing “Overbought” conditions on all cycles, and ongoing indicator divergences, it’s going to be interesting to watch this one play out.
McCurtain Call/Put Dollar Value Flow Line (CPFL)
Daily CPFL rallied to a new short-term high last Wednesday, then pulled back a bit. The uptrend begun in December 2011 remains intact and with CPFL now above resistance on the daily trend created last September, the indicator could be construed as being “positive.” But the fact is, both Daily and Weekly CPFL are “Overbought” at 1.81 and 1.76, respectively, and the indicator is nowhere near overcoming major resistance created nearly two years ago.
Which means that while options players have participated in this market since the spring of 2011, but they have done so at a diminishing rate as compared to options buying off of the March 2009 lows.