Apple Falls Flat as Market Rebounds - Is There Really Investor Confidence? 24 comments
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This past week will live on in infamy, unless this is just a warm up for the big show. That’s because this past Wednesday (November 19) we broke through the support level that had been holding this market up since our first monumental drop in late September, early October. Since that time we’ve been thrashing about in a flurry of volatility, the likes of which have never been seen before in the stock market. And it its wake, all the world's economic institutions have been brought to their knees.
Well, that support was the last line of defense before the 2002 Bear Market lows. And although most investors thought that it would provide good support for the time being, there is the fear that we might compromise that level quickly. And if we did, there would be little underneath that to hold this market together. On Thursday it happened. We blasted through the 2002 lows, sending shivers down the market’s spine. All hopes were pinned on an oversold rally on Friday (November 21).
The Futures on Friday morning were up slightly, just above the lows, and we stayed that way most of the day except for a nail-biting period mid session. But then, with an eleventh hour rally, the market blasted off, gaining over 6% on the S&P, 6.5% on the Dow, and a little over 5% on the Nasdaq. The Nasdaq has been lagging behind the other two indexes during most of this decline. Apple (AAPL) barely participated in the rally, gaining a measly 2.6% on the day. But more importantly, AAPL failed to regain 85. That’s an important level for Apple as it represents the price just before the introduction of the iPhone back in January of 2007 and it’s a strong technical level as well.
So from a market perspective, all’s good right? And from a technical perspective there are all kinds of positive patterns shaping up. A strong late inning rally, with gains of 5, 6, 6.5% in a mere 60 minutes is encouraging, isn’t it? Under normal circumstances maybe. Bouncing off of such an important level and rallying is all good, but it didn’t make up for the week’s entire losses, as the markets were down huge this week. The S&P and Nasdaq were both down over 8% and the Dow fared a little better down just over 5% for the week. Apple got hammered and was down 8.5% for the week.
There’s a lot of people out there talking up the fact that we bounced off the 2002 lows, as though we’re safe now and the counter rally should ensue. I understand this, it’s gotta feel good to get a reprieve from all this nastiness. And we may in fact get a near-term rally, but don’t let your emotions get the better of you, don’t get all giddy, because it won’t last.
So, let’s look at what some of the potential reasons were for the rally. Probably the easiest correlation was that at 3 p.m. Wall Street got a boost of confidence with a report that President-elect Barack Obama plans to name New York Federal Reserve President Timothy Geithner as Treasury Secretary. I believe that was just a catalyst. The other factors were that the markets were extremely oversold and compressed, they just had to give way sooner or later. Also, we had options expiration, and all those shorts covered to lock in those profits. There was no other news. We didn’t solve the financial crisis, people still can’t get loans, the housing market is a mess, and the CEOs of the Big Three auto manufacturers were sent packing by congress and told don’t come back until you have a plan, cuz we ain’t giving you no money without a plan.
Ok, so the president-elect took a sliver of uncertainty out of the marketplace, if you could call it that. At least we now know who the guy is that we’re gonna pummel when Paulson goes back to being a regular citizen. But that doesn’t change anything with our economic situation. The fear index (VIX) is still sitting at astronomical levels, the fear hasn’t subsided, and while the fear is cranked, we will still see the whipsaw and wild price swings.
The other important factor about these gains on Friday is that leaders didn’t fully participate in all the gains. If the leaders aren’t leading, then how much confidence can you have in the event? I mean look at AAPL. and Google (GOOG). Both had gains well under the index gains, and Apple is largely thought to be the de facto leader of Technology and a proxy for the whole market. Remember that Apple is widely regarded as one of the shining stars through all of this - no debt, tons of cash and still breaking sales records as people are losing their jobs. So, if Apple was flat and failed to retake that important 85 level while the rest of the market was surging, what kind of confidence does that give you that this rally has legs?
Disclosure: Short SPX.
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This article has 24 comments:
Apple Inc's solid fundamentals make it more of a target for short term profit taking in this downward market: Sell now going down, catch it on the way up. What Friday reveals is a collective perception of any rally now as ephemeral. Eventually things will turn around, and if your colleague, Andy Zacky, is right, that may happen in an explosive fashion come next earnings report in January. If Andy's numbers are close to reality, they will be too compelling to sell on, and there will be a frenzy to get it at that point.
Zach you are nothing but a piece of crap and a disgrace to the american society!
In good times aapl is driven largely by speculation - not your charts and numbers. The forces currently in play that have wiped away aapl value are much larger than your levels of 'support'.
His repetitive single minded messaging is being spouted at every moment that suits his meme...
Sadly, it appears that the tide is starting to turn for the gold bugs, and the evening air will soon be filled with their shrill cries once more.
Now you don't seem to bother with that, you just insist that it must go lower. Why?
The U.S. has a lot of companies in trouble, including a lot of tech companies such as Microsoft, RIM, and Yahoo. Apple on the other hand is a solid company, that has had success after success, even in this current market. Why not talk down a company that has real problems with it's business? Such as a company that has a new operating system that no one wants (vista), a mobile phone OS that no one wants (windows mobile?) rather than a company such as Apple's who's products are in great demand. (iPhone, OS X Leopard)
Can you not make as much money shorting other companies that are more easily understood (because they really don't have much technology).
On Nov 24 10:16 AM brewer wrote:
> Zach, at first you tried to make it sound like you were trying to
> 'save' investors when you first started 'warning' about the economy
> and about Apple (while professing to be a fan of the company).
>
>
> Now you don't seem to bother with that, you just insist that it must
> go lower. Why?
How about Apple Lemming or Mac Psycho? Would that work better for you, you PC piece of crap!
On Nov 24 12:40 PM ND wrote:
> I don't like the term "fanboy." It sounds like a gay slur. Well,
> I like Apple, AND I like women. Do backers of other stocks get called
> names like this? Just wondering.
i'm not a day trader...i'd like to convert some of your readers to long term investing...it's easier on the emotions.
On Nov 24 01:32 PM ND wrote:
> "Mac Psycho?" Now THAT has a nice ring. Or maybe iPsycho. BTW: I
> was being facecious (maybe I should start using a "smiley face")
> Hope PC in your post means "politically correct." 'Cause I'm a Mac.
Whether or not you have a hidden agenda in your AAPL views, I had more respect for you before your slide into the kind of slurs that don't belong here,specifically in your reply to ND:
"How about Apple Lemming or Mac Psycho? Would that work better for you, you PC piece of crap!"
And I am seeing more kids with iPhone. Just wait until it is more common to make FREE phone calls with the touch from wifi hotspots. This is working and there is no need to jailbreak the iPod. Sales for iPod are looking quite good for years, and iPhone and Macs. I believe the big money is going to want in as soon as a trend begins upward which is going to happen at some point, probably after the inauguration.
On Nov 24 02:14 PM bobsaf wrote:
> Zack:
> Whether or not you have a hidden agenda in your AAPL views, I had
> more respect for you before your slide into the kind of slurs that
> don't belong here,specifically in your reply to ND:
> "How about Apple Lemming or Mac Psycho? Would that work better for
> you, you PC piece of crap!"