{"id":59706,"date":"2022-05-13T22:40:58","date_gmt":"2022-05-14T05:40:58","guid":{"rendered":"https:\/\/drduru.com\/onetwentytwo\/?p=59706"},"modified":"2022-05-14T16:41:06","modified_gmt":"2022-05-14T23:41:06","slug":"apple-leads-picture-perfect-bear-market-bounce-the-market-breadth","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2022\/05\/13\/apple-leads-picture-perfect-bear-market-bounce-the-market-breadth\/","title":{"rendered":"Apple Leads A Picture-Perfect Bear Market Bounce – The Market Breadth"},"content":{"rendered":"\n

Stock Market Commentary<\/strong>:<\/h2>\n\n\n\n

In the middle of last week, the S&P 500 was poised to hit bear market territory<\/a>. Conditions were ripe with the stock market trading in deeply oversold territory and other indices toiling deeply in bear markets; a sharp rebound could happen at any time for any excuse. Both the S&P 500 and Apple Inc (AAPL) provided the excuse. Apple led the way for the bear market bounce. AAPL printed a picture-perfect rebound after tapping its October, 2021 low. AAPL lowered its loss for the day with a 2.7% drop. Friday’s 3.2% gain still left AAPL with a whopping 6.5% loss for the week. With AAPL leading the way, the S&P 500 stopped just short of its bear market line. That line represents a 20% loss from the index’s all-time high set in January. Traders and algorithms must have rounded up and declared “close enough.” Buyers took the wheel from there.<\/p>\n\n\n\n

\"Apple<\/a>
Apple Inc (AAPL) gained 3.2% after a picture-perfect bounce off its October, 2021 low.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n

Technicals are shining in this period of high volatility. The market seemed relieved when Federal Reserve Chair Jerome Powell appeared to take a 75 basis points rate hike off the table: “So 75 basis point increase is not something the committee is actively considering” (from the transcript<\/a> of the press conference). The S&P 500 soared 3.0% that day but collapsed the very next day by 3.6%<\/a>. Fast forward to an interview with Marketplace<\/a>, Powell clarified that the Fed will respond flexibly to the data (as always). NOTHING is off the table: “…if [things] come in worse than what we expect, we are prepared to do more” (the 6:30 market in the audio). That revelation did not stand in the way of the picture-perfect bear market bounce.<\/p>\n\n\n\n

In other words, the episodic news hardly matters here given the more important looming interplay between high inflation and tightening monetary policy. On the technical side, I continue to watch important levels of support and resistance and, most importantly, oversold trading conditions.<\/p>\n\n\n\n

The Stock Market Indices<\/strong><\/h2>\n\n\n\n

If the oversold period remains extended, then the S&P 500 is working on a new (lower) churn zone. On Wednesday, the S&P 500 had just 98 points to go before hitting an official bear market. At its low the next day, the S&P 500 stopped just 22 points short. However, with a 19.55% loss from the all-time closing high, enough algorithms (whether human or robotic) decided the index got “close enough” to the automatic trigger for a bear market bounce (just round that number up to 20%, people!). With Friday’s positive open, I assumed traders carved out a kind of bottom, and I jumped on a fistful of SPY shares. With the index closing just below critical resistance from the May, 2021 low, I expect to take profits in the coming week.<\/p>\n\n\n\n

\"The<\/a>
The S&P 500<\/a> (SPY) came within 22 points of hitting its bear market line. The approach was close enough to trigger buying interest and a 2.4% surge to end the week.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n

The NASDAQ (COMPQX) was much less interesting from a technical standpoint. The NASDAQ is deep into its own bear market, so any bounce in this vicinity is a bear market bounce. The tech-laden index rebounded strongly enough on Thursday to close flat on the day even with AAPL closing deep in the red. Friday’s 3.8% gain for the NASDAQ put overhead resistance from the September, 2020 high into play.<\/p>\n\n\n\n

I was all set to load up on QQQ call options once SPY closed in on the spot for a bear market bounce. I set my trigger or SPY at $385. SPY dropped to $385.15 for its low on Thursday. That small miss was HUGE! In retrospect, I should have manually triggered the buy after the bear market bounce got going.<\/p>\n\n\n\n

\"The<\/a>
The NASDAQ<\/a> (COMPQX) gained 3.8% on Friday to limit the week’s damage to a 2.8% loss.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n

The iShares Russell 2000 ETF (IWM) stopped short of a complete reversal of its November breakout. The ETF of small caps signaled a bottom on Thursday with a 1.2% gain after its bear market bounce from the lows. Friday’s 3.2% gain puts overhead resistance from the 20-day moving average (DMA) (the dotted line) into play.<\/p>\n\n\n\n

\"The<\/a>
The iShares Russell 2000 ETF<\/a> (IWM) gained 3.2% to limit the week’s loss to 2.5%.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n