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Painting The Tape Sends Mixed Signals

|Includes: International Business Machines Corporation (IBM)

By All About Trends

Yesterday the DOW was up about 83 points at the close. Care to guess where a big part of that came from? You got it, a name that makes up 13% of the index -- IBM. IBM was up to 5 points and that one name accounted for the bulk of the gains.

Back out IBM yesterday and the DOW wasn't up anywhere near 83 points (sorry CNBC to pop your balloon but that is the reality of it). We've talked numerous times how Wall Street uses names that have the biggest percentage impact on the indexes to prop the market to give the impression everything is fine and the drive is alive. It's called PAINTING THE TAPE. Under the surface a lot of growth names were note moving and there was a lot of jello moving on the plate.

We bring this up today because the NASDAQ is down some 12 points as we post. Not all that big to downside BUT AAPL is up like 9 points and due to it's heavy weighting (13% of NASDAQ), it's masking the weakness making it less than what it really is.

Keep in mind on one hand Wall Street has a vested interest in keeping you in the game (it's called management fees). On the other hand under the surface it likes to mess with you while you are looking at just the headline numbers.

Sometimes this "painting the tape" (giving the impression everything is fine) is used to allow those with large positions to sell some peanuts without you noticing.
This is how negative RS divergence shows up on the charts -- move a few key names while under the surface distribution is taking place.

As far as AAPL goes? Let's take a look at it from a daily chart perspective and then below that from a weekly chart perspective.

As you can clearly see, on the weekly we've laid out a few blue lines that could act as support. For now, we'll watch this name. A retest of the blue line lows in the daily chart may spark our interest in going long this name for a trade.


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