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QE3, Apple, and Rekindled Love for Stocks - How to Use Technicals to Navigate a Confusing Stock Market
By, Simon Maierhofer
Tuesday September 11, 2012
This week is jam-packed with news. Apple, Bernanke, and Germany's Constitutional Court are slated to make potentially market-moving announcements. Here's one simple technical tip that will help navigate a confusing situation.

What does Apple’s Tim Cook, the Fed chairman Ben Bernanke, and Germany’s Constitutional Court have in common? They are all expected to announce much anticipated news this week.

Wednesday, September 12. Apple

Apple is putting the finishing touches on the Yerba Buena Center for the Arts in San Francisco. That’s where a select few will (or are expected to) lay eyes on the new iPhone 5.

Apple shares (AAPL) didn’t quite reflect fans’ excitement as shares dropped 2.6% on Monday.

This drop triggered a bullish percentR low-risk entry against the 20-day SMA. Just because this is called a “bullish” low-risk entry doesn’t mean it’s time to buy.

Apple shares tend to move higher when new products are revealed and correct thereafter (with the exception of the April 2012 iPad 2 unveiling, which coincided with a larger drop, instead of a rally).

A rally parallel to Apple’s event would likely provide a good set up to sell AAPL shares. A drop below the percentR trigger level will also suffice if we don’t see the customary Apple release spike.

Short selling a stock is not for everyone, but Apple accounts for 20% of the Nasdaq-100 index (corresponding ETF: PowerShares QQQ) and shorting the Nasdaq-100 via ETFs like the Short QQQ ProShares (PSQ) is a more accessible way to benefit from falling Apple prices.

Wednesday, September 12. German Constitutional Court Ruling

The European Stability Mechanism (ESM) is the facility anointed to distribute European “bailout cash” to struggling euro zone members.

The ESM has many flaws (one of them is lack of funding) and one of them may prevent its VIP from playing “money ball.” The German Constitutional Court will rule over the legality of participating in the ESM on Wednesday.

Thursday, September 13. FOMC and QE3?

The Federal Open Market Committee (FOMC) will meet Wednesday/Thursday this week.

I personally don’t think that launching QE3 right now makes sense, but I don’t know what’s going on behind closed FOMC doors and the general consensus is that the Federal Reserve will announce QE3 on Thursday.

Similar announcements have resulted in large moves for stocks, Treasuries, currencies, gold and silver.

Combat Uncertainty with Technicals

What does the S&P 500 chart tell us about stocks? If the chart could talk it’d say that now is “rubber meet the road” time.

The S&P is close to key resistance at 1,440 (this month’s r1 is at 1,437) which the Profit Radar Report has been harping about. 1,440 is the most important resistance in the neighborhood. It separates bullish bets from bearish ones and provides directionally neutral low-risk trade opportunities (my bias is to the down side, which may require waiting for a spike above 1,440 followed by a move below).

Various news events suggest that this week is important. Technicals agree. Use important support/resistance levels to put the odds in your favor.

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