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My advisory has put forth a terrible possibility: A CRASH.
Here are Mike Turner's words:
There have been 4 consolidation periods in the market over the past 107 years, where the Dow has traded in a fairly well-defined trading range. These consolidation periods lasted, on the average, about 12 years. There was one that ran from 1906 to 1925; another one that lasted from 1937 to 1950; one that existed between 1966 and1982; and, the last one that started in January of 2000 and (maybe... more on this, below) ended in October of 2006.
No one ever knows, for sure, when a consolidation begins and ends until enough time has elapsed to be able to look back and then identify starting points and ending points.
If you make the assumption that the most recent consolidation began in January of 2000 and ended in October of 2006, when the Dow moved above that level and turned it into a support level from a resistance level, then the current situation in the market is that the Dow is now getting very close to its last support level of 11,722.
But, if the Dow closes below the 11,722 level, one of the 3 following conclusions could be made:
The Dow closing below 11,722 would be a harbinger of the 1929 crash, which triggered the only time in history that the Dow ever closed below its previous consolidation period. The actual event of crossing below the upper range limit of the previous consolidation, which occurred in 1931.
THE question is, then, are you a Bull or a Bear? Hamlet?
If you're a Bull, then you'll also believe:
The Dow is still in a consolidation period that started in January of 2000, except the actual upper limit of the consolidation is 14,093 (the highest weekending close of the Dow since January 2000) and a low of 8,000 (the lowest low since January of 2000).
Give me a break. Does anyone seriously believe that, as the Dow keeps moving lower, past 11, then 10, then 9 thousand, it's still in a 'consolidation' period? No.
Besides, it makes no sense to hold long positions (except for puts) if you believe that, yes, we could see the DJIA at 7,998 but that 'it's only temporary because it's within a consolidation range'. You'd be losing your IRA, your 401K, and your kids' and their kids' college fund in the process!
Let's all give advisories a round of applause. They've put in some good time picking apart all the data and info for a small fee. I just need to pay more attention to my cash balance as small as it might seem at any given time.
Let's Go
I've come up with a good catch phrase in these times of severe Fed induced rallies: Sell the news, buy the rally. Yep. If you're long puts, news is usually bad and it's a good time to take some profits off the table. But, along comes Fed to prop up markets. That's a good time to buy some MORE puts at a big discount. Would this strategy have worked since July '07? Like a charm.
A good question is: which puts would you consider owning in the coming weeks given the fact that we're looking to test the aforementioned support level? I'd have to go with financials and maybe some NASDAQ companies. More likely, I'd stay away from straight mortgage lenders because they're the ones who have been severely punished of late. A good bet would be a bank, like BofA (BAC), because they have a lot of exposure and its share price is still relatively high. Another good bet might be a reinsurer who's likely going down anyway, like XL Capital (XL).
As for NASDAQ, I'd have to go with Apple (AAPL). Not only has the stock split in the past but it's also run up like wildfire. At 200, it couldn't hold up. I don't claim to know why, precisely, but I'm certain that it has something to do with the technology.
Having been a hardcore Mac user since the late 80s, I remember a good Mac, one which would mold itself to your will and wants and one which provided a real, tangible, albeit spiritual connection to other Mac users. It was like being taken on a cosmic ride by a wave of knowledge and pleasure. Whew! Those were the times when Apple would bring all races and all nations together. The thing was electric. When OS X "ten" came out, something was not so right. Everything seemed to work right, but the learning curve was gone. You could no longer make your own Mac, as it were. It was prebuilt for you and you had to comply with the given framework. I stopped using the Mac then and haven't touched one since.
I could go on and on, but my point is that the platform ain't all there. Jobs stole the guts and left only a framework, which he filled with other people's chips and some sort of nonsense software. Tiger, Jaguar, Leopard - all nonsense. Where's the Apple menu? That was the HEART of the Mac. I'm dead serious. From the Apple menu would come food for everyone, worldwide. Besides, it's clear that there are a lot of counterfeit iPhones in circulation and that the schematics must have come from someone at Apple. Keep in mind that it's a global marketplace and phones are sold in just about every continent.
It has great support , nowadays, at 120, but at some point it's gonna get busted. However, naked puts are expensive, especially the longer out on the calendar you go. Looking at the daily chart (from Oct 05 out), I'm looking for the stochastic indicator to cross the 75 line (on the uptrend) before really entering into a serious short position. As for the MACD, it needn't cross the zero line for the stock to tank. It spent so much time above it that it could spend a lot of time below that level.
As the Toys
As this option series winds down, the bear grows stronger while the bull grows fatter and dumber. I remember the tech bubble, trust me. Yahoo (YHOO), was, what 250 dollars...(pre-split, I know) but my point is that these companies, for one reason or another, lose their edge and start to WIND DOWN.
Disclosure: none
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This article has 27 comments:
Well put. But there's more- if the writer can be so incredibly wrong on his assessment of Apple's business based on a misguided personal opinion of their product, how do we take anything he says seriously? Really! Bank isn't missing the ballpark with his predictions for AAPL, he doesn't even know what city he is in!
You couldn't have said it better, right on.
For god's sake grow up man you are supposed to be advising people not airing your childish prejudices.
"At 200, it couldn't hold up. I don't claim to know why, precisely, but I'm certain that it has something to do with the technology."
What a retarded statement. It couldn't hold up because it was overbought. Even if Apple was not a technology leader (which it is), it wouldnt be the reason the stock price pulled back after a huge run.
Why is this kind of content being produced here?
"Steve Bank is an independent investor, reviewer, and computer consultant. His broad experience includes self-representation in courts of law, undergraduate major declarations in classics, music, and sociology, and many miles behind the wheel of an automobile on North American highways."
This BIO gave me a great laugh, basically he is saying he has gotten into trouble with the law ("self-representation"... went to college, used a computer, and drove around the country. Not exactly the pedigree I'm looking for in a person whose advice I would take. This is just a lay person's opinion and really he has about much chance of being right as a monkey throwing darts at a stock table. It his opinion though, and he is free to voice it.
This fellow is one of them.
God help America.
It makes everything ELSE seem incomplete and bothersome frankly.
And he doesn't even know or comprehend the importance of OSX across desktops, laptops, iPods and iPhones.
APPL will indeed be back over 200 and will make today's prices look like a gift.
Nooooooooooooooooo!
Everyone here listen! Go out and buy another Mac to make up for this horrible turn of events. Steve can't know there's someone out there who doesn't love him.
I consider this the worst article I've read on your site. Come on guys! Raise your standards.
... like, dude, um, maybe like the acid was really starting to fry your brain by then??
Just a thought -- it really does mess you over time.
Just say no to drugs... and to Steve Bank.
this is no longer for a good laugh, this is a serious problem