"What's Apple going to do? Their halo's cracked. Can they repair it?" said Scott Redler of T3Live.com. "I think people are anticipating that Apple could be good. If they went into Google and IBM short, they got torched, so maybe some shorts think that Apple could follow in their footsteps and they are covering."
IBM and Google restored some faith in tech earnings, which were expected to be a mixed bag this quarter. Both stocks traded sharply higher Wednesday after Tuesday's reports, and Google was having its best day in 15 months. (Read More: Google Earnings Rise, Stock Higher)
"People made their entire year on being long Google and short Apple last year," said one trader. "I think they sold a little bit (of Google) and now they're realizing there is still growth there."
Apple stock has lost 28 percent from its peak of $705 in September. Wedbush's Steve Massocca describes it as trading more as a value play these days than a growth stock.
"If they miss it's going to go down and make a big news story, make a big splash, but I don't think it will alter the valuation that much," said Massocca. "It would have a passing affect for a day or two, but I don't think it would be viewed as a long term story."
If Apple beats the estimate of $13.47 per share, it would be the same story in reverse.
"I think it will move up but not as much as other stocks might because of its size," said Massocca.
Apple earnings are expected to decline about three percent from year ago levels, and revenues are expected to be up 18 percent at $54.73 billion.
"I think there will be questions about margins and market share going forward even if they do well," he said. Analysts expect Apple sold 48 million iPhones in the quarter, up from 37 million in the period last year.
Apple has beaten estimates 92 percent of the time since 2003, according to Birinyi Associates.
The stock has gained 70 percent of the time in after hours trading on the day it has reported, for an average gain of 2.4 percent. But by the next day in pre-market trading, Apple is typically flat, and 68 percent of the time, it has closed lower on the day by an average half percent move.
"The street wants to see margins above 37 percent and the earnings over $14," said Redler who is playing the earnings report through options.
The Nasdaq and Dow were both higher at midday Wednesday, but the S&P 500 was dragging with a small decline. The Dow Transports, Russell 2000, S&P 400 and S&P 600 this week have all made new highs—a bullish sign. The S&P 500 has broken out above its 2012 high, and is at a five-year high, and the Dow is also at five-year high. (Read More: 10 Stocks Send Transports Surging)
The one index that hasn't joined the move to highs is the Nasdaq, heavily dependent on technology stocks and the performance of Apple. The move in the indices, however, is positive and it suggests the market could move higher, as buyers are drawn in.
"It's (viewed as) bullish, and there's more to go. That very well could be the case," said Carter Worth, Oppenheimer Asset Management's chief technician. "The issue is how can you be at all-time highs and have some prominent names, such as Wal-Mart, AT&T, Philip Morris, Apple and Coke just dragging…Intel was a testament to it last week."
"In order for us to keep going, tech has to join. So far, so good with IBM and Google, and now we have to see what happens with Apple," said Redler. "We can take out the old highs in the S&P, but it doesn't have to happen in the first half of the year. It can happen in the second half."
Worth, who is negative on the market now, said a case in point could be made by looking at the S&P 100 last week.
"The best single performer was Dell, and the worst was Apple. One is basically a dinosaur selling buggy whips," he said of PC maker Dell. But Apple is one of the most valuable enterprises in the world, and yet its stock has suffered a near 30-percent decline from its high on growth and margin fears. Dell has moved higher on leveraged buyout talk. (Read More: 'My Bet Is Up in Apple': Najarian)
So far in January, the stock market is up more than 4.5 percent. About 20 percent of the S&P 500 companies had reported earnings by Wednesday, with 68 percent beating estimates, according to Thomson Reuters. Now the earnings wave has turned to tech, and traders say this could be make or break time for the rally which started in November. Microsoft also reports this week, after Thursday's closing bell.
"If Apple and Amazon put up big numbers and go up, this market is going higher," said Worth. But Worth said if there's a big miss in tech land and stocks get hit, "it wouldn't be casual, it would be violent."
However, Redler says that even if Apple misses, the market is used to moving ahead without it, and it may continue to do so.
"I think the market is psychologically prepared to continue without Apple, and if Apple gets involved, it could give it a little bit of an adrenalin shot," said Redler.
The positive reports from Google and IBM triggered a sharp jump in stock futures after Tuesday's close. Google reported earnings per share of $10.59, and the stock jumped four percent.
That was a far cry from last quarter when Google missed its estimate. Google was expected to report fourth-quarter profits of $10.49 per share on revenues of $12.3 billion, according to Thomson Reuters.
IBM stock also moved sharply higher after both profits and revenues beat estimates. The company reported $5.39 per share, compared to estimates of $5.25.earnings and year ago profits of $4.71 per share.
"Google and IBM have both been lagging the tape over the course of the last month," said Redler. "As indices made new highs, there's been concern about Google and IBM, and their lack of participation. I think the market did well going higher without them, so it will be interesting to see what happens if their gap up holds."
Paul LaRosa, technical strategist at Maxim Group, is also watching tech earnings because of the Nasdaq's failure so far to return to highs.
"The Nasdaq needs to close over 3200. That's the one fly in the ointment," said LaRosa. "If that doesn't happen, with the other three, it could lead to a negative divergence and lead to a sell off. I don't think people can turn totally bullish yet. We're still cautiously optimistic."
"To me, it's curious why the Nasdaq isn't over 3200, if the others are at highs. Obviously, Apple is a big weighting," he said. For instance, Apple is 14 percent of the smaller Nasdaq 100 index, and was 19 percent before its decline. LaRosa said the Nasdaq's performance will certainly be influenced by the wave of tech earnings. "It's a key week," he said.
But to Worth, it's the whole range of major stocks that aren't moving higher that is the concern, and that's what's holding back the S&P. He also notes that some stocks have already made their moves, such as Ford and Goldman, and they are getting tapped out. He said another negative is that investors—individuals who are starting to put money into mutual funds and hedge funds managers—are all getting too bullish.
The S&P's next milestone would be 1,500, a psychologically key number, but to LaRosa, the number to watch would be 1,575, above its 1,565 closing high from 2007. (Read More: Are Stock Market Bulls Too Hopeful?)
"The longer it takes to punch through the more the likelihood is you're not going to punch through, and you hit a near-term top. The strength has taken some people by surprises but you just can't say buy across the board," he said.
But it could go higher. "Maybe the fear and greed drives the market to extremes. You may have the greed factor and people say 'I'm missing it.' That pushes it to extremes," said LaRosa.