iPop?

Apple did their usual, “beating” of expected Quarterly earnings and then lowering expectations for next quarter, only this time the market smoked them. You can see here that Apple rallied right up into resistance today. In after-hours trading it has fallen $18 to $300, so basically it has given up all of Friday’s gains.

The last resistance level was $292 and Apple had a mini “flash crash” off of that level. The event was later blamed on a “rumor”… On a side not, the S&P 500 ETF (SPY) had its own “flash crash” upon Apple’s earnings release, falling 10% in a matter of seconds. Over $500 million in orders were reversed –

http://www.bloomberg.com/news/2010-10-18/nyse-euronext-cancels-trades-of-s-p-500-etf-at-9-6-below-opening-price.html?cmpid=yhoo



IBM also ran too far too fast and is down $5 in after-hours trading.
Microsoft (MSFT) is down too, with a key executive deciding to leave.

My big concern with Apple is that Apple is over 20% of the weighting of the NASDAQ 100 Index and it could have a nasty effect on QQQQ. One day it will fail and it will blow up the market, because it will simply be owned by too many people who all want to sell at exactly the same time – see Intel, Cisco, Microsoft circa 2000.

Markets give clues when things change. Sometimes it is a process, where prices drop, rally back up, drop, rally back up… Markets tend to do this. Stocks and Sectors can literally top in a day. These days are normally the biggest down day ever in price, on the biggest day ever of volume, where price is significantly overbought. October 6th may have been one of those days for a key group – Cloud Computing.

Take a look at some of the leaders from the group – VMWare (VMW), Salesforce.com (CRM), Red Hat (RHT) – the patterns are now tops.

Other former leadershad similar days – F5 Networks (FFIV), Citrix (CTXS), Rackspace Hosting (RAX), Mercadolibre (MELI)



Markets top as leaders break, stock by stock and sector by sector. It is critical to watch how leading names are doing and how they react to earnings this month. On the chart below, I have listed critical support levels for the S&P 500 (ES Z0-D). As long as price holds above these levels, the uptrend remains intact. If price fails to hold these levels, then the possibility opens up for a more substantial correction or top.



Also keep a close eye on the US Dollar, because believe it or not, when Apple tanked this afternoon, the US Dollar spiked higher. Gold, The Euro and The S&P 500 all tanked in unison. It was amazing to watch. The bottom line it this, if Apple has topped, then money had better quickly rotate into other areas.