Apple Investors Need to Get a Grip

I declared the Bear market over yesterday, and that the bottom was 1200 on the S&P; that hasn’t changed. However, what followed was a rough day, no doubt. And if you recall my words from yesterday’s blog, I said there would be days like these. I just didn’t expect it to happen so soon, I guess you never do. I know many people are still reeling from the downtrend we’ve been through, and yesterday probably made you feel like we’re slipping into it again. But I don’t think so. The daily and weekly charts simply don’t bear that out (no pun intended).

What I have also been saying for the past week, is that even in the wake of good days, like the ones we had the past several sessions, you must be cautious and go light. When you come off a Bear run, you can’t take anything for granted, you have to expect huge swings. The reason for this whipsaw, besides the fact that we just came off a nasty downtrend, is that earnings inject volatility into the markets. Remember, emotions are high, sentiment and tolerance are low. Add to that imperfect news and you have the recipe for emotional upheaval. If it’s too much for you to handle, then move to the sidelines for a while until things settle down. Cash is a valid position, and many times the right position to be in.

Remember the Wilderness mantra, capital preservation first, maximum profits second.

Now, I declared 1200 the bottom, and yesterday we crept down, losing some hard fought support, including 1275 and the 20-day moving average at 1260. We should have pretty strong support in the 1240-1245 range, as those represent recent lows where we had good launching points in the past couple of weeks. If we lose that level, it’s not out of the realm of possibilities that we retest 1200, but I believe it’s not very likely. The thing that will provide strength is the positive divergence in the weekly chart.

So, how should you approach today (Friday, July 25)? Take a break, sit back relax, watch the show. If you have skin in the game, protect or withdraw it. If you must be a player, keep in mind the sectors that big money has rotated out of, like agriculture, commodities and energy, and into sectors like technology and financials. That is all.

Disclosure: Author holds a long position in AAPL

Comments

[Andy Cole]

Bear market over? You've got to be kidding me.

[Zach Bass]

No Andy, I'm Bull serious. It's Negative Nellie's like you that will fuel the advance.

[wada]

Zach, I don't get the headline...no word on Apple in your text.

[David Forjan]

Zach,

Thanks for your insights.

You are one very smart dude.

Thanks again.

David Forjan

[Zach Bass]

Wada, I'm just pointing out that we can't sit here wringing our hands every time we have a down day. Have a plan, stick to your convictions. And Apple is part and parcel of the S&P.

After we came off the bottom everyone was bright-eyed, we have one down day, and everyone is doom and gloom. Well, I'm here to tell you that the outlook is good for the markets right now.

This morning a strong Durable Goods report and better than expected Housing data provided this mornings pop. However the market is still feeling the pain of yesterday so the response to this news is somewhat tempered.

The good thing under the covers, is that we have a strong daily and weekly chart outlook (positive divergence on the weekly), let's see if that will prop us up enough and keep the market from testing the bottom (S&P @ 1200), and get those positive divergences to send us up.

And one more thing: Consumer confidence is making a comeback...The University of Michigan's consumer sentiment index has come in higher than expected. C'mon people, let's drive that price up to where it belongs. Damn the naysayers. GO APPLE!!

[wada]

Zach,

Thanks, I sort of thought you were using the headline in that way. I am long Apple, have been for five years. Though, I sometimes wish that I knew something about options and shorting. Apple is one of the truly great companies of modern times and we thank you for your insights.

[pabs]

well im hijacking this thread with a couple of somewhat related comments

i like your dialog enough to add you into my daily apple read (i am long) along with a couple of select others

suggestion 1
make your site zachbass.com an iphone friendly site layout wise
given your chosen topic it makes sense, that where i read you mostly

suggestion 2
like you i am frustrated by the ineptitude and agendas of the analysts that analyze business but are not 'in business'
i think you suggested a rating system for them ? so do it, your great with charts and numbers, grab the top 10 ? mark their earnings estimates as a percentage in terms of accuracy by the quarter and offer a cumulative average for each guy, post it right at the top of your site permanently that updates every 90 days
it would get a LOT of attention for you,
and provide a lot of value to individual investors such as myself,

[Zach Bass]

Thanks Pabs. Just for everyone's information, my website www.zacharybass.com IS iPhone friendly. Just point your iPhone to it and it's formatted perfectly for the iPhone. It even supports Disqus comments!

As to the analysts rating system, I along with the Wilderness investors (my Apple investor group, 550 strong) are coming up with the details on just such a feature.

-zach

[Digital Czar]

I bought Apple back in 97-98 when it was at $17, and then some more at $17, there was a 2:1 split and I bought more at $60, all told I have a goodly number of shares.

If I were Chicken Little I wouldn't. So I hold not for tomorrow, or the day after or the month after, maybe the year after, depending.

IOW, I don't panic and there will always be swings, but the general trend is upward.

There. You're right, Zach and I'm sure my buddy Don Crabb would agree with me where he still with us.

[Partners inGrime]

Don Crabb! Now there's a name to remember.

[nbj622]

declaring an end to the bear... haha!... you could write for TMZ.

[NetworkEffect]

Zach, the analyst rating system is a game changer - revolutionary for the markets. I'm surprised it hasn't been done yet. Just a suggestion - you should also allow amateurs to play as well. Level the playing field even more. I was just curious as to your thoughts on one issue - if you are successful with it, and it garners attention from the masses and people start to use it as a tool to make decisions about whether to buy or sell a stock, these things tend to be self-fulfilling prophecies once they gain momentum (eg. the Cramer effect - if he says it's going up, it goes up because everyone buys it because he said it would go up). How do you prevent that from happening? Is it even possible to prevent that from happening? When things become a self-fulfilling prophecy like this, is it healthy for a marketplace?

Just stupid, irrelevent thoughts rambling around in my head as I avoid the things that I'm supposed to be doing.

[jmmx]

Zach

Thanks for the thoughts, I appreciate them. I also agree strongly "Damn the naysayers GO Apple!"

HOWEVER

I do not think we are out of the (bear-filled) woods yet. Not by a long shot.

I think the depths of this Republican Recession have not yet been reached. IT'S THE DEFICIT FOLKS!

That is what is driving the dollar down and US investments along with. That and the financial crisis, of course. AND the trade deficit.

In the past, we have been able to buy our way out of a recession with well placed government spending that created jobs. Unfortunately, we are now in the sad position that we have no money to spend because the current administration has borrowed up to the hilt. Borrow and spend. Borrow and spend.

In the past also, a weak dollar meant that our goods were cheaper overseas and production would pick up. But we do not produce anything here anymore (except grains which are doing great!). So we will not get a big lift here. Though I suppose tourism will help. (especially when they come here to buy their iPhones)

So I am not so optimistic as you are. I hate to say. But if housing has a REAL turnaround - then go for it. I believe that housing is traditionally the first out of a recession.

[jnz]

There is an old saying. "Bears make money and Bulls make money. Pigs lose money". The analysts like to slop the pigs.

[kmanm]

Why do you include the word "Apple" in the headline but you are not even mentioning apple in your article?

I am an apple investor and I wanted to read the article because I thought it was talking about apple.

Motley fool's articles are known for these type of scheam...great catching headlines without any substance. Do you want seekingalpha to be the same?

[mollytjm]

warren buffet's rule # 1: don't lose the $. rule #2. don't forget rule #1.
unfortunately, most of our financial institutions forgot rule #1 in a 'greed partnership' with their customers.
for value investors, the worth,financial security and growth potential of a company is important, but it's 'moat' is also important. apple never had much of a moat until the last couple years. those of us who loved apple always worried that the moat would be breached and the castle successfully charged (in those days by microsoft who hadn't yet felt the glories of Vista).
clearly, apple's moat is now enormous. value investors are taking advantage of price drops and picking up more. the Chinese are coming
and Apple will do well.
however, fear mongers reign since 9/11. the market never really came back. the geopolitical climate is very different now. Americans are safer than ever, but they don't FEEL that way and that feeling gets triggered by almost anything, including a shift in gas prices.

Apple is a great, long term company, but it's newly that. in this timid climate people need to see more of it, the expansions, the staying power and the constant profitability of it. that will happen but it will take a little time to FEEL solid to most investors. i love Apple. as far as i'm concerned, there's no better, visionary company around. and now it's becoming not just visionary, but VISIBLE. That's the important next step! I'm long APPL and will stay there.

[Yousaidwhat]

Oop!! Looks like you must have accidently used the wrong headline with this article. It doesn't appear to have anything to do with Apple Inc.

[John Egan]

OK.... I'll chime in too..... Where's the Apple? jegan ;-)

[Zach Bass]

If you check out all my articles you will see that I'm addressing Apple and the markets as they affect Apple. Sometimes the market is what Apple investors should be focusing on.

[Blair]

My assessment is that bottom will be at the 2002-03 lows. That means there are still roughly 3,000 points to go down.

Reason?

If Obama gets elected, then there will be a massive sell off of long term holdings because the capital gains taxes will go up nearly 100%.

[Palo]

Bass
Jul 26 06:35 PM
My Website
"If you check out all my articles you will see that I'm addressing Apple and the markets as they affect Apple. Sometimes the market is what Apple investors should be focusing on."

Thats nonsense - actually crap.

Don't put Apple in the headline if you don't specifically refer to it in the article.