Monday's Apple, General Market Fundamentals Favor Bears

Apple (AAPL) investors were really looking for a bounce Monday, with the hopes that it would be a strong impulsive move up and reverse the MACD which was pointing straight down. When the session opened, AAPL movers and makers quickly tested 172 as we predicted (actually bottoming out at 171.56). Then the currents started to shift, and at 11:15 PM, AAPL sprung to life and put on a spectacular 3 hour run making a beeline for positive territory, all the way to 175.88! Was this the bounce we were looking for?

Had we closed out there, it would have appeared at first glance that we had our impulsive move up, with the bonus of a beautiful bullish hammer. But there was a problem. The MACD didn’t budge, it was still pointing straight down, and volume was anemic. The move up wasn’t strong and impulsive, it was vacant of any strength, just a lot of hot air. The Bears had seen enough and seized control at 2:35 PM, they ramped up the volume and dragged AAPL all the way down to 173.16 -0.29 (-0.17%) - a huge disappointment.

So what happened to the bounce? AAPL wasn’t the only victim of this huge letdown. The Nasdaq index experienced a similar fate, and it was the same story across virtually every timeframe (1, 15, 60 minute charts). We were so oversold from the beating stocks took last week that you would think AAPL and the market was owed a bounce. Yet, the bears had and continue to have total control. And with the daily MACD just crossing the zero line, there’s plenty of downside room left for them to do their work.

After the close I went home and loaded my iPhone with the latest financial podcast. I was listening to theStreet.com Real Story with Frank Curzio. I like Frank’s back ally style analysis and his brash Brooklyn accent, plus he always has good guests. As I listened to the show, I was struck upside the head when Frank was recapping the market and he characterized today’s action on the Nasdaq, AAPL and other tech notables as “flat” or uneventful. I couldn’t believe my ears, because from a cursory view, the ending price didn’t move much from last session, and may have seemed innocuous to untrained analysts. But this is Frank Curzio, I thought he would have a little more insight than that.

The fact is that prices overall ended up flat, but it moved tremendously during the trading session today, but the “Real Story” was in the market internals and the bulls no-show. Decliners led advancers by over 2.5 to 1 on the Naz. The Dow and S&P faced similar action at 2 to 1. And volume was pathetically low. It’s as though the Bulls just decided the resistance was futile, and might as well sit on the sidelines and let the Bears do their will.

So, will there be a bounce? It’s hard to imagine that with such oversold conditions we won’t have one. Besides, many could use a bounce to get out of some straggling longs, and the market could use it to reset the oscillators. Once the oscillators get reset, we should have some good short opportunities. Can’t short while the oscillators like the RSI and stochastics are pegged in oversold territory.

One final thing. It appears with yesterday's action that the Nasdaq acted noticeably weaker than the Dow and S&P. Also, tech and other growth-oriented sectors did not fare as well as Oil Services, some commodities like steel and precious metals, and Utilities. This could be the start of a big money rotation out of tech. We’ll keep an eye out for you.

Disclosure: None

Comments

[Toni]

I'm curious this time about the comments your lovable readers will post.

[Toni]

Doris ? Are we at 200 yet ? What ? Going to 160 ? I see.

[Shorting Should be Banned]

Short Selling should be banned because it is more of a stock traders tool and not an investment tool. Stocks are not commodities and should not be subject to this type of volatility.

[Toni]

"Short Selling should be banned"

In the meantime it's here. Next post.

[BS Detector]

Voodoo.

[leo123]

i cant wait for aapl to go to 160... thats when you buy back.

[Shorting Should be Banned]

The squeeze should be on today.......
Short sellers should have the courage to put up their own money and buy put options!

[Constable Odo]

Will I ever see $200/share from Apple this year? Hard to say. Apple fundamentals are good, but will Apple again offer poor guidance. Will Steve Jobs catch another cold? Will IT give the iPhone an equal chance to go toe-to-toe with RIM's BlackBerry? Is there a chance that mainland China will welcome the iPhone this year? So many variables to hold Apple from achieving $200 a share until the 3rd or 4th quarter. When I see people yelling $250 or $300 it just seems so unlikely to happen. I only hope I'm wrong, but the way Apple's stock price continues to backslide regardless of positive news, it's becoming difficult to keep the faith. I don't want Apple to see any $160s, so I'll start praying today.

[Toni]

Odo, who left the vase open ?

[reagan]

Odo, sooner or later Apple will break the 200 window & it won't look back. Just too much positive news out there for it not to. I'm not very patient either.

[thompr]

Zach,

Do you realize how useless the observations of the first 3 paragraphs are, at least in terms of applying them to the future, which is what investing (or trading) is all about?

If any of these TA methods had any validity whatsoever, you would see more day traders on the list of richest people in the world. You do not.

Thompson

[BS Detector]

"Short sellers should have the courage to put up their own money and buy put options!"

Um, do you know how selling short works in the real world?

[Zach Bass]

Thompr,

I'm not a day trader, I'm a Swing Trader and Trend Trader (investor). I apply the SiFT method to picking stocks and entering positions; SiFT stands for Screening, important Fundamentals, and Technical Analysis (I just made SiFT up, but it's essentially what I do).

I use technical Analysis to determine market sentiment. I take a contrarian approach to that analysis, so I'm usually quite pleased when everything is going to hell in a hand basket, because it means good times ahead.

My point of the article was to point out the where the sentiment currently lies, and the likely scenarios we will endure on this slide down. By identifying critical events, levels and trends, I hope to help investors make informed, reasoned decisions that will maximize their trading and investing performance. Man, that sounded like a commercial!

I guess if we all had half a brain, and had ambition to become one of the richest people in the world, then we'd simply follow your advice, right? Damn Thompr, where have you been all my life? I'm gonna do it the Warren Buffet or John Henry way. Then I can just sit back and watch the billions flow in. Thanks man!

[thompr]

<I guess if we all had half a brain, and had ambition to become one of the richest people in the world, then we'd simply follow your advice, right? >

Yes.

<Damn Thompr, where have you been all my life? I'm gonna do it the Warren Buffet or John Henry way.>

That's a great idea.

<Then I can just sit back and watch the billions flow in. Thanks man!>

Well, I wouldn't say that you will also have the performance the richest people in the world got, but putting their methods to use is a far cry better than giving any credence to the observations you made in this blog.

Thompson

[Toni]

Thompr,

you just gave me an hard on.

Thank you.

[pabs]

can anyone that listens to thestreet.com be taken seriously ?
as for the rest of the article its mumbo jumbo gussied up as analytical prose
horrible

[Shorting Should be Banned]

"Um, do you know how selling short works in the real world?"

Short sellers borrow stock owned by investors (without explicit permission), sells them (thereby driving the price down) and subsequently repurchases the stock at a lower price and returns them.

That all I need to know !!