I suppose the reason that it is becoming ever easier to be bearish on stocks in general, and those in the U.S. in particular, is the box that the Federal Reserve has placed itself in over QE. Indeed, to my mind the die of doom was cast last September as the central bank sought to safeguard against a Fiscal Cliff disaster by going for “infinite QE”. By rights, the equity market should have tanked back then. But, of course, instead we have seen a rally to new record highs as traders attempt to call the bluff of the authorities – somewhat like George Soros did in 1992 knowing that the Bank of England would wimp out of the ERM.
However, looking at a selection of my favourite U.S. stocks, it has to be admitted that if there is a collapse on the way, it is very well disguised. This is especially the case as far as the new economy plays are concerend, with even social media giant Facebook (FB) delivering quite a pie in the face to the bears last week. Indeed, while it may be the case that some on the short side have been caught out by the recent price action at Apple (AAPL), it would appear that there is actually enough for traders of both persuasions to take something positive home with them. This is because the overall pattern here since the start of this year has been that of a range between $390 and $460, with quite sharp turning points and gaps through key moving averages. While we theoretically have a conundrum here as far as whether the post Steve Jobs breakdown has come to an end, going by the technical the message from the 200 day moving average currently at $479, this is a negative consolidation, at least until we witness a higher support point above the 200 day line.
Speaking of higher lows above the 200 day moving average – a decent example of the genre can be seen on the daily chart of “Government snooping collaborator” Google (GOOG). This was delivered in November just after “Spymaster Obama” was re-elected in November, and was typically successful as a sustained buy signal. The present position is that we may be expecting a pullback towards post June support / the September uptrend line at $950, but really, while there is no end of day close back below this combination, the upside scenario is as high as the 2012 price channel top of $990, and can be expected over the next 1-2 months.
Presumably in a parallel universe where I had become a Member of Parliament, BBC executive or NHS Trust Manager (!), I would have plenty of time to play Farmville. But, in the meantime, looking at the daily chart of social game group Zynga (ZNGA) seems to be the way forward. It is certainly quite an intriguing situation in the sense that we now have an unfilled gap to the downside through the blue 50 day moving average currently at $3.15. The setup now is that the shares are likely to find support at and above the floor of a rising trend channel from November / 200 day moving average at $2.92. That said, those who are not so sure of a rebound would be waiting on an end of day close back above the 50 day line before targeting the 2012 price channel top target – as high as possibly $4.40 on a 1-2 month timeframe.