The Stock Market Won't Crash And These Charts Confirm It: Amazon.com (AMZN), Apple Inc (AAPL), Microsoft (MSFT)

  • It is impossible to predict a market crash.
  • Technical analysis needs to be interpreted against catalysts.
  • Focus on the largest Tech stocks for clues regarding the market direction.
Amazon.com (AMZN), Apple Inc. (AAPL), Microsoft (MSFT) Indicate The Stock Market Will Not Crash
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No, you cannot predict a market crash, and this article demonstrates the absurdity of the idea. Even the Street.com's headline "How to protect yourself from a 15% correction in the Stock Market," is after the fact analysis. There is no way to know when it will happen. It is like asking the now defunct company, Polaroid, how it could have protected itself from disruption of the digital camera.

These market crash predictions amount to nothing more than fear mongering. Don't get me wrong, chart patterns are not bad, but using armageddon language is bad because a market drop is just a drop.

So, I am definitely sure that all of the doom and gloom prognosticators have never read the book titled "Technical Analysis Of Stock Trends" by the founding father of technical analysis, John Magee. I believe it was Magee who stated that one should not try to predict but basically go with the ebb and flow of the market. Projections are there to give you a heads up, but you should not be sounding worthless alarm bells. (See also: Predicting Pullbacks In Berkshire Hathaway Inc. Stock Using The VIX)

When I look at these charts (I will post a few of them below) that analysts show for proof, alarm bells go off in my head.

Source: Marketwatch

Source: Marketwatch

There are so many things absurd with this analysis. I go over a few of them below.

First off, in technical analysis 101, breaks in trendlines do not mean a thing. Just look at how many false breakouts have you gotten whipped around on? You need to look at catalysts, only then will a chart pattern play out. Also, the trend changes with the market as I have drawn. In no shape or form can you call a crash, you are just looking at probable areas. Now, the charts are representative of catalysts. If the catalysts are good, it will be reflected in the charts.

Second, looking at a gap down of a 30-minute chart shown above, you cannot claim the crash may have started and use individual stocks with daily timeframes as proof. It comes across as data-mining, where you are trying to find significant information when it does not exist.

Third, lower time frames have more noise than higher time frames. If you have day traded before, this statement will hit home. Longer time frames have less noise. This is why I am surprised that a Wall-Street analyst would make such a basic blunder using an intraday chart as proof of a potential drop.

What to focus on

What is the market? It is a basket of stocks. So, focus on the stocks that have been keeping the market up. The market is not some mystical force like the pundits make it out to be. Here are a few of the major tech stocks that are preventing the market from falling: Apple Inc. (NSDQ:AAPL), Microsoft (NSDQ:MSFT), and Amazon.com (NSDQ:AMZN). In addition, these stocks are among the top 5 stocks by market capitalization. These are your indicator stocks. The idea is to keep it extremely simple. (See also: 3 Hidden Growth Catalysts For Apple Inc. Stock)

What is the direction of Amazon, Microsoft, and Apple? Up.

(Source: Yahoo Finance)

(Source: Yahoo Finance)

Source: Yahoo Finance

Now there is a very simple interpretation. Don't over complicate it. These stocks are above their 20 day, 50 day, and 200 day moving averages. To a normal person, this indicates a strong uptrend. Now, the catalysts for these stocks will be the earnings that come out in the coming weeks, not just the earnings for these stocks. Because, these companies are linked to other companies due to their network alliances. So,expect to see sympathetic moves based on firm and industry level perception. Thus, if the firms associated with these companies and the overall industry report bad earnings, it will be a catalyst that would indicate a temporary drop in the market otherwise it will be difficult for the market to fall.

Looking for great tech stocks to buy? Check out Amigobulls' top technology stock picks, which have outperformed the NASDAQ by over 110%.

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Author's Disclosures & Disclaimers:
  • I do not hold any positions in the stocks mentioned in this post and don't intend to initiate a position in the next 72 hours
  • I am not an investment advisor, and my opinion should not be treated as investment advice.
  • I am not being compensated for this post (except possibly by Amigobulls).
  • I do not have any business relationship with the companies mentioned in this post.
Amigobulls Disclosures & Disclaimers:

This post has been submitted by an independent external contributor. This author may or may not hold any positions in the stocks discussed. Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. Amigobulls has not verified the author’s positions in the stocks discussed, and does not provide any guarantees in this regard. The author may be paid by Amigobulls for this contribution, under the paid contributors program. However, Amigobulls does not guarantee the authenticity or accuracy of the information provided by the author in this post.

The author may not be a qualified investment advisor. The opinions stated in the post should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions.

Amigobulls does not have any business relationship with any of the companies covered in this post. This post represents the views of the author/contributor and may not reflect the views of Amigobulls.

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Comments on this article and AAPL stock

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ccastro103
neutral
no where in your article did you talk about the fiticious global economies that is being supported by ultra loose accommodative central bank policies, which is causing global asset price distortions and inflated assest prices . these prices are high due to companies using easy credit to repurchase their own stock and funnel dividends to keep their price afloat . also the growing trend of passive index investing which is also helping keep stock prices elevated . we had 5 quarters of earnings decreases and the market kept chugging along higher ? the complacency in the market is disturbing . plus the growing geo-political risk and increase in populism and protectionism views. the u.s economy is driven 70% by consumers and the current policies have hurt them . the only ones benefited from these policies are the haves . then you have chinas fiticious economy and who knows what their real economic numbers are cause they constantly fabricate it . just look at Japan . Japan was China in the 1990s. same euphoria, same credit driven growth and look at Japan now . they still havnt recovered. once China collapses the contagion effect will be massive . but i'll remain in the sidelines and allow you guys to remain apart of the heard and keep chugging along.
1 reply
pepaugu
neutral
Thank you for this reasonable and realistic view of things which I share entirely. You focus the significant market segment which in my eyes doubtless is tech. You could also mention Intel and Cisco which will outperform the market greatly, whereas some dinos like banks and commodities will suffer terribly.
1 reply
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