Is the bull run over or is it just a correction? AAPL, Biotech, Industrials - what and where are the markets headed in this swoon?

Is the bull run over or is it just a correction? 

AAPL, Biotech, Industrials - what and where are the markets headed in this swoon?

Trucharts.com - Weekly Blog update

Hi to all our readers and viewers. We did not publish a blog last weekend due to some family commitments. 

Finally got back to the markets and sure enough - excitement all week - DOW was down seven days in a row. The Dow Jones, AAPL, NASDAQ, BIOTECH, Technology, Semi-Stocks and many indices were down for the week. Oil crashing, commodities crashing, China markets down (over $4T valuation wiped out), gold was down - then bounced, earnings were spotty and big energy stocks are being abandoned. With oil crashing, energy companies margins and earnings will be headed downwards. 

Narrow breadth and leadership in the markets were the key points we discussed in our previous blogs as being the indicators and signs of a topping market. We had several huge 3 digit moves and these type of moves are very characteristic nature of topping markets and this is exactly what we were observing. We had also indicated through our facebook and twitter page to sell into any rallies or going short certain stocks. 

A fight between the bull and the bears and short covering were driving stocks like CMG,GOOG,AMZN,NFLX and the top horsemen of the markets higher. The DOW component stocks are being hammered down and we think the DOW has definitely topped out. Revenue growth in companies in the S&P500 were unimpressive and EPS were primarily inline and forecasts were either lower or inline. We will have to wait to see how this plays out. We had also indicated to be short the semiconductor stocks after the INTC and MU earnings report and this played out very favorably for us. We are still short INTC,AMBA and SWKS. QRVO news was terrible and many other companies reported inline and their forecasts were below analyst estimates. We think this will impact AAPL earnings next quarter - the Apple watch and Apple Pay are also not performing well. We prefer to be short the AAPL suppliers and would lighten up on any technology positions on any rallies in this sector.

Now the Biotech stocks - these are the stocks that have helped the NASDAQ run upto new highs (eclipsing it's old high from the 2000 bubble). These are starting to show signs of fatigue from the huge run-ups and for the first time in over a year the IBB etf closed below it's 13 week SMA. We need to see it stay below this 13 week SMA for another week and if it does, we can expect it to go the 50 week SMA at around 320. We are short IBB. We are also seeing some stocks in this sector dropping from their bubbly highs. 

We had to close our TWTR position - we think this stock is headed lower. We had hedged the position with puts so we were able to handle the loss. We went long NFLX.

The averages have definitely broken some trendlines along with some major averages - we think this a bad sign and expect some volatility in August going into the September Fed meeting. Jobs report this past week was 215K but that was still above what we call a critical threshold of 200K jobs per month. Real estate is in a bubble mode and as are stocks and both these sectors will have to correct - stocks are already correcting and it is definitely a stock picker's market.  

UPDATE: We forgot to mention the number of new highs has been contracting sharply and therefore stocks hitting new lows is rising. Media stocks tanked last week and many of these broke major trendlines, and there has been major insider selling in all stocks. These are all signs that we have topped out after this 7 year bull market run. We would highly advise to take profits and sell any rallies.

As for China - the country is now in control of their markets - but we think this will be a futile exercise and the country is mired in over capacity, high debt, real estate bubble and still has a strong currency - we think they need to devalue the Yuan to gain over their rivals in the Asian subcontinent. Shadow banking is a huge problem in China and we have to see how the party handles the situation and not letting the markets run freely.

Let us see some of the charts we have discussed above along with the indices charts:

1. AAPL Chart support at 105 - expect a bounce after MACD and RSI turn. Short.
2. DOW Jones support at around 17000
3. IBB headed to around 330-350 range - Short
4. NASDAQ support at 50 week SMA.
5. NFLX still looking strong
6. SPY - support at 50 week SMA

 

 

 


Interesting articles for reading this week:

http://www.peakprosperity.com/insider/93862/why-china-extremely-vulnerable-now
http://www.zerohedge.com/news/2015-08-08/12-trillion-fat-finger-how-glitch-nearly-crashed-global-financials-system-true-story
http://www.newsmax.com/TheWire/legionnaires-outbreak-new-york-city-bill-de-blasio/2015/08/07/id/669061/
http://news.yahoo.com/chinese-dragon-losing-shine-foreign-firms-035151394.html
http://www.huffingtonpost.com/buck-wargo/boomerang-kids_b_7912484.html?ncid=txtlnkusaolp00000592
http://finance.yahoo.com/news/150-watch-terrifying-apple-luxury-184402938.html
http://www.businessinsider.com/made-by-china-is-what-chinese-consumers-want-now-2015-8?r=UK&IR=T
http://finance.yahoo.com/news/irresistible-china-stock-trade-keeps-160001314.html
http://www.businessinsider.com/r-china-producer-prices-slide-to-six-year-low-in-july-2015-8
http://www.businessinsider.com/factset-q3-eps-estimates-sp-500-prices-2015-8
http://www.businessinsider.com/the-worlds-seventh-largest-economy-is-in-a-downward-spiral-2015-8

Good luck trading.

Trucharts Team