Market Outlook: Apple Close to Triggering a 'Buy' Signal

The largest company in the world, Apple (NASDAQ: AAPL), fell almost 9%, but major market indexes were little changed. Markets will likely continue consolidating until some hint of clarity emerges from Washington.
 
Stock Prices Reach an Important Level
Other than AAPL, many stocks saw only small price changes last week. Because AAPL accounts for about 19% of the assets in PowerShares QQQ (NASDAQ: QQQ), an ETF that tracks the 100 largest Nasdaq stocks, that ETF was down, falling 1.32% for the week. About 4% of the assets in SPDR S&P 500 (NYSE: SPY) are invested in AAPL, but that ETF managed to deliver a small gain of 0.18% last week.

Because AAPL is such a large holding of index funds, the stock can't be ignored. There are some reasons to expect at least a short-term rally in AAPL.

Shown on the chart above is an exhaustion indicator called the DeMark Sequential. It is one of the most widely followed indicators on the more than 200,000 Bloomberg terminals used by market professionals. On Friday, the count reached 12. When the sequential count reaches 13, a buy signal often follows.
Traders will also see that stochastics is on a buy signal on the weekly chart, but is bearish on the daily chart. The indicators are mixed, but I think there is a very high probability we'll see a bounce in AAPL, which would be a positive for the major stock market averages.  (more)