Sell in May, Go Away? Daily Update for April 27, 2012 & Big Picture, AMZN, AAPL, GOOG

"Sell in May, Go Away" ?

Going into the weekend, the end of the month, and the start of the famously bad "Sell in May, Go Away" market seasonality, I would like to take time to step back a little and see the big picture.

The most important levels in technical analysis are the ones that everyone can agree on, not the 61.8% level or any such thing but the places where price has been before and anyone can see on their chart.

The Big Picture

So for me, the most important guide to the market is this chart of the Nasdaq 100 (NDX) going back 20 years, where I have marked crucial top and bottom areas:

As you can see, each of these levels has been an important resistance level, none of them have been easily blown through. At each of these levels, it was prudent to bet on a market reversal, at least the first time it was tested.

So, right now, we are clearly in a very precarious position, we are very extended into this key level of 2800, which was the 2001 high and a major inflection point in the multi-year market crash at that time.


Here's a zoom-in on our current situation:

After the long period of consolidation we had between 2000 and 2400, we had the momentum to propel us here, but now we may likely need another period of consolidation and possibly further pullback to continue higher.

The scary thing for longs is that there really are no significant supports nearby.

Unless we can confirmedly clear 2800, I am not anxious eager to be long into these resistances.

On the other hand, it is a powerful bull market which may pop through 2800 now and head at least to 2900, so I am not anxious eager to short at this point.

For shorting, I would like to see us attempt a new high and receive selling pushing us back below 2800, or, to head up and resist strongly at 2900 possibly would be a good short entry.

S&P 500 (SPX)

Reviewing this same chart for the SPX, we can see that we do have strong support at the 2011 high of 1370, and no real resistance until 1440, so odds are we now trade up to 1440, and 2900 or 3000 on NDX, at which point taking profits and going short will likely be the smart trade:

What do do today?

Well, at this point, I would like to be long, sure, but I'm not going to jump in after 3 up days.  We will probably need to go sideways a bit here before launching higher. If it does launch higher, based on news, oh well, it will have to be without me.

I would look to enter if we can retest the 61.8% retrace at 2732 on NDX, and then we would need to break the 76.4% at 2760 quickly and easily for me to stay in:


It is a concern that AAPL has lost that 61.8% retrace and not made a new high, but I imagine the psychological level of $600 will be a key area there where buyers might step in heavily:

One major concern for this rally is that the AAPL chart is really not looking compelling right now.

First GOOG weakened, and now AAPL, and although Amazon (AMZN) is spiking us higher today however, running straight into the 76.4% retrace, if it hangs out here too long it could get hit with some heavy profit-taking by longs who were trapped in the long decline:

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