Thoughts from our recent conversation with Ralph Acampora, one of Wall Street’s most respected technical analysts, which can be listened to on the Newshour podcast page here or on iTunes here.
"We're starting to see some heaviness and breaking down in some of the more aggressive names and I don't think that bodes well," Ralph Acampora told Financial Sense Newshour this Saturday.
A strong and defensive rotation into the utility sector, a continued breakdown in Apple (the largest publicly traded company in the world), along with a rollover in some of his closely watched technical indicators are a few of the things that are making Acampora nervous, should they persist.
Furthermore, a large number of "great technicians" he met with are now quite bearish, he said. And, although that’s usually a good sign from a contrarian standpoint, he can’t fully dismiss the idea that we are looking at a "massive potential top" in the stock market.
Here’s some of what he had to say on our podcast this Saturday:
Breakdown in Apple Troubling
"A little pullback after a great run from the February lows is more than necessary. We need to digest the gains; we need to correct a lot of the overbought conditions, which we are doing. But I'm a little nervous when I see a big stock in the Dow like Apple breaking down...and I have targets a lot lower for Apple. I think Apple is selling somewhere around $89 and I could make a case for the mid- to upper-70s and if you get that kind of a breakdown in some of the big Dow stocks, it makes me wonder. Especially when I look at the Dow itself, the key support level is the April 7th intraday low and that was at 17,484.23; same level on the S&P 500 was 2033.8… I'll stay neutral short-term with the expectation of further upside gains as long as we don't close below those levels. If we do, then I have to re-evaluate because I think the market will be vulnerable then."
Failed Rallies
"We're starting to see some heaviness and breaking down in some of the more aggressive names and I don't think that bodes well. And, yes, I think when you see a gravitation towards utilities and things like that, that makes you stop and think because my biggest fear and the biggest problem I've had over a year now is failed rallies... the Dow would get up to its old high and then churn and churn. Obviously, this February through May rally, it failed to make another new high. So, hopefully, we don't get the breakdown. If we do, then I think some of the technical indicators I look at like the MACD—moving average convergence-divergence, which I like to look at on a weekly basis—and they are starting to roll over so it's not very good."
Massive Top
"I was recently with a bunch of great technicians in New York and we all got together and, I have got to say, that many of them were bearish and some severely bearish. And they pointed back to…all of 2015 and now early 2016—all that churning—and they look at that as a massive top…and I can't deny that either. I mean especially if we are getting another failed rally here…because I do worry about that massive potential top…"
Head Fake
"If we can hold above that support level I was just talking about—the April 7th lows—I think we'll have a nice tight trading range right here and then from here try to push through to new highs. If you look at the move most people expect right now, it's the Dow and the S&P at all-time new highs. No one is talking about that—very few people are talking about that. That would be the head fake that I'd love to see."
Listen to this full podcast interview with Ralph Acampora on our Newshour page here or on our iTunes page here. Subscribe to our weekday premium podcast with various guest experts, strategists, and book authors by clicking here.
