S&P 500, Dow and Nasdaq Futures got a charge over the weekend. It seems that the US Treasury take-over of Fannie Mae is going to be well received, if not with some apprehension. Sure they will rescue Fannie and Freddie from going belly up, but at what cost to tax payers? Some say $100s of billions. If you were holding Fannie puts going into the weekend, then good on ya! If you were long, then, well… I’m sorry for you.

Fed interventions like this usually result in a temporary bounce, or it could put a charge in the market. I believe we should take a defensive posture and prepare for the bounce, followed by a weighty retraction, rather than hope for a rally. Hey, if the rally happens, then great! Just don’t count on more than a few days to the upside and use the strength to exit longs.

So, take heed with what the market has told us on Friday (September 5). Bad economic news, jobs down, and financials it total collapse, followed by rumors of a Fed intervention that reverse the freefall, essentially placing a tourniquet on the bleeding. This resulted in bullish reversal candlesticks on most indices and on many stocks. For example the S&P plotted a Bullish Hammer, while AAPL churned out what could be best described as a Spinning Top or High Wave candlestick pattern.

In any event the S&P retook critical levels. So what are the support and resistance levels we need to watch there? If on Monday we were to open above 1265, then I would say 1260-1265 is support. Resistance will be our old nemesis range of 1295-1305.

On the Naz we have support with the 50 day moving average, which is currently at 2328. Assuming of course that we gap up on Monday. If we do, resistance will be the 20-day moving average at 2385.

If AAPL can et above its 200-day and move above its 50-day at 169, that would be a major victory before the Tuesday’s Let’s Rock media event. The event will be held at the Yerba Buena Center for the Arts in San Francisco at 10 am PST.

If past Apple events were any predictor on future results, then I would have to say that AAPL the stock will probably get an initial surge in price followed by a plunge in the same day. Then once the news filters through the market, and the analysts have their say, it will likely be perceived as a good thing. However in this particular event, there’s growing sentiment among Apple analysts that it will be and underwhelming announcement.

Yesterday I excoriated Wall Street for being a bunch of mollycoddled, overfed, aircon-softened weenies, that lacked the courage and conviction to move the ticker past their adversaries. I suggested that they were softened by their extended summer vacations, perhaps too many mint juleps.

Accept the challenge so that you may feel the exhilaration of victory - George S. Patton

Well, today they proved me wrong, at least the Bears proved me wrong. You Bulls need a spine, I’m very disappointed in you. Man it took a long time to get to this point, and there’s no denying the gravitas today’s action in the market carries. Gone is the critical support level of 1260 on the S&P 500, next stop is a big gap down to the July low of 1200.

What makes this event so important is the makeup of the move. It was total market breakdown to the core. That’s right, there was confirmation in the internals as decliners led advancers by a whopping four to one, with down volume eclipsing up volume by more than nine to one on both the Naz and the NYSE!! YIKES!! 

So if you’re a Bull the first thing that probably comes to mind is a bounce. Am I right? Sure there will be bounces, we might even backtest 1260. And let me tell you, don’t get caught up thinking we’ll get back to the promised land. Look at those bounces as opportunities to short, nothing more.

Now I’m going to throw a cautionary wrench into this analysis. I felt pretty much the same way, only on the other side of the battle line, when we broke up through our wedges about a week back. Man, I thought we finally broke through, and I could say goodbye to the froth and start acting like a Bull again, only to be quickly thwarted. Will that happen here? It could, but I doubt it. We’ve slipped into Bear territory and that’s a tough spot. Let me just say that if we do recapture 1260, it will be a miracle.

So what about our favorite stock? You could say that AAPL kind of held it’s own, at least in the first half of today’s session, that is when compared to the other leaders of the pack, namely RIMM, GOOG and BIDU. But as the day wore on the rat pack went down and down hard, AAPL finished at 161.22 down 5.74 (3.44%). The rest went down big, but BIDU suffered the most, down 7.54%! We had leader break downs across all sectors, including financials like Goldman Sachs (GS) and commodities like Potash (POT). Even Oil was down with Light Crude finishing down over 2% for the sixth straight session.

So, listen up investors. Today was a very important day. Don’t take it lightly, because you’ll get burned. Tomorrow we have the Jobs report before the bell. If the numbers are good and we get a bounce, take profits quickly. If we have rallies, sell into that strength and then expect them to get sold off quickly. Be prepared for opportunities to short. Other than that expect plenty of froth until the big boys decide where they are going to rotate their money. It would be futile to try and pick a sector or stock right now. Wait for the market to reveal itself, or use a neutral trading strategy like I described in this blog post.

IMPORTANT: Investors, we are extremely oversold and so we will likely get reflexive rallies. Don’t buy into them, literally. If you have positions in peril, sell into that strength. Also, look for that strength to setup shorts. AAPL may be resilient here, probably not the best short candidate. The market is going lower.

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So according to Kevin Rose of Digg, the Apple event next Tuesday will be all about iTunes 8 and new iPods, specifically a new Nano-like iPod. It will be in a retro form, longer and thinner like the original Nanos. That’s great, but I don’t see how that advances the Touch interface. Here’s a question, will these new iPods finally unify all Apple devices and computers under OS X?

There’s speculation that we’ll see the Nanos, and the shuffle get beefed up in terms of capacity. Hmmm, yeah, so what? They’re also saying that the price point will be lowered. I wonder how low it can go before it becomes a block buster? Apple isn’t known for producing low-priced products, and for good reason, they’re worth it. Besides, we don’t want to mess with their outstanding product margin, envy of the entire industry, do we? What if it comes stuffed with your favorite music? Or maybe a year subscription included in the price, that’d be cool! This could be their anti-piracy initiative that answers the thuggery of the RIAA while simultaneously slapping them in their face, the RIAA needs to be slapped!

Ok, from an investors perspective, let’s assume that we get these new Nanos, and possibly end-line the Classic, and primp up iTunes with new subscription capabilities, how will this add to the bottom line? Is there going to be a mad rush to get one of these nifties for school, or as a stocking stuffer? Will this be the next adolescent fashion statement? Is this going to put a booster rocket under iPod sales, which have been experiencing slower growth?

And what about stock price? Man it needs a shot in the arm. We have 3 trading days until the event. What can we expect from AAPL? Here are some scenarios, you can add yours if you think I’ve missed one.

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