It’s now or never time for the bulls. Heading into the final week of the quarter, the S&P 500 (^GSPC), as well as proxy SPDR S&P 500 (SPY), are perched on the pivotal 200 day moving average. And, although this area has proven to be stealth support of late, it is likely to cave soon if bulls can’t get it together asap. Multiple bearish headwinds have come to the forefront, including the situation in Greece and the possibility of contagion to fellow PIIGS, a tenuous European Union and EURUSD (Forex: EUR-USD), and stateside jawboning about the US debt ceiling. The markets are barely in the black for the year and a drop into negative territory may add political pressure as media headlines sour. This technical, fundamental and psychological setup has portfolio managers particularly concerned, as quarter end typically includes mark ups and portfolio padding. But, the current environment is anything but typical. Clearly, the markets are at a major crossroads and the coming weeks will prove pivotal for the rest of summer.
Stocks like Apple, Inc. (AAPL) have been “tells,” recently alerting the market that there was trouble ahead as it fell below its 200 day moving average. But Apple bounced nicely and now rests on this important line in the sand. This may give portfolio managers hope for quarter end markups during a week that gains are desperately needed. Apple’s story is particularly unique, as media wonks and analysts alike have pointed to a forward PE of 11.5 and 20-35% estimated revenue growth as value indicators. Others, though, have questioned the implications for its, as well as others, stock correction, wondering if upcoming earnings season may be tarnished by early warnings, misses, or poor guidance. Could any of this currently be fully priced in? Investors will find out soon enough.
Below are this weeks annotated charts, including Apple, EURUSD, and updated weekly and monthly S&P 500 charts with simple technical and TD (Tom Demark) analysis overlay from last week’s piece on market uncertainties.
Watch the 200 day moving average of the S&P 500 and Apple closely. And manage risk accordingly, understanding that the risk you take home is the risk you’ll wake up to. Happy investing.
Previously published as a blog by Minyanville.
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