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MLR - Premarket Pulse January 8, 2013

The general markets pulled back on lower volume as they continued to consolidate recent gains. The last three days of market action following last Wednesday's massive gap-up move have been constructive as the indexes appear to be forming a tight flag on their daily charts. With tax increases a known factor and quantitative easing in full force, uncertainty is less of a factor, so the uptrend could continue despite the fact that many have a hard time believing it.

Apple (AAPL) looks like its trying to put in a sort of "Wyckoffian" low in Monday's action and so we would consider staying away from the short side of the stock pending either a) a rally back up towards the 50-day moving average or b) a clean break of the neckline at around $500 as a downside "breakout." A "Wyckoffian" low is simply a situation where a low is put in and a rally ensues, followed by another pullback that occurs on lighter volume - essentially a pattern of higher lows with each pullback low occuring on lighter volume, a sign that potentially selling pressure is dissipating in the short-term. A logical reflex rally up to the 50-day moving average, currently at 553.46, would still be consistent with the overall H&S formation that AAPL is still trapped within, and it is possible that a final resolution to this pattern, either bullish or bearish, will not occur until earnings are announced on January 23.

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