I’ve been playing the role of un-enthused skeptic over the recently announced iPhone 3.0 software development kit ((SDK)). I’ve Twittered about it, spoken with friends, colleagues and even family, and universally I have been castigated for my “lack of vision” or faith. I’ve been told that this SDK, with its 1,000 new APIs, will stoke developers into developing all sorts of new applications. What? And add to the other 25,000 applications already available on the App Store?

Isn’t it more likely that with the majority of new SDK features that existing apps will simply be upgraded to take advantage? Think about it, is Copy & Paste going to be the impetus for a new class of applications, or simply add a feature to existing apps that should have been there all along? Even the addition of the Map Kit, with the Google (GOOG) Maps Service, while cool, will simply enhance applications like Trails or the plethora of Geocoding apps out there. I’m sure it will inspire some new apps, as it invigorates developers to take a fresh look at the possibilities.

Tech is Holding this Market Down

The Banks and the leaders in tech were on fire yesterday (Tuesday Feb. 24), but of the big four, Apple (AAPL) sported the weakest advance. Does that have any real significance in the big picture, probably not. It is worth noting however, that AAPL did recapture that critical 90 level, but failed to recapture its 20/50 day moving averages.

The markets made a good comeback as well, but the S&P couldn’t recapture the 775 level. Will it get there today?

There’s no doubt that the tech-heavy Nasdaq has held up fairly well in the face of what happened today. What? You didn’t hear? The Dow Jones Industrial index CRASHED! And the S&P 500 was right behind it. That’s right, the Dow broke through it’s 2002 lows. The S&P has also broken through those lows, and is teetering on a meltdown as well.

AAPL plotted a viscous bearish engulfing candle, as well as most of the leaders of tech. Of the leaders, only Amazon (AMZN) remains above its 20/50 day moving averages, but all the tech leaders have plotted bearish crosses on their respective MACDs. The Nasdaq is in very big trouble, with the leaders breaking down, it is on the precipice of a total collapse as well.

I was on Ken Ray’s Day 6 podcast this weekend (February 14, 2009) trying to make sense of the markets. Ken was interested in why Apple (AAPL) had risen from its lows of 78 to over 100 in the past three weeks without any apparent news events to correlate with the move. We talked about how uncertainty and mob sentiment determines the price of AAPL, or any stock. But I don’t think Ken was buying the explanation I gave. Or perhaps he wanted to understand, but it’s all so complicated it’s no wonder how anyone makes sense of it.

The disconnect comes when we don’t decouple news events and company fundamentals from the supply and demand realities on the trading floor. The term trading floor is more of a metaphor, as the Nasdaq and S&P stocks aren’t traded on a trading floor anymore, everything is electronic. But the basics still apply, where price is determined by both the supply and demand of a stock. And that supply-demand equation changes with the winds of investor sentiment, which can be affected by a multitude of factors.

Many investors thought tech might be our leader out of this lateral basing pattern the markets have been sliding through the past few months. But that doesn’t appear to be the case, as stocks like Apple (AAPL), Google (GOOG), and RIM (RIMM) were all up roughly 1 percent for the session, they all printed inverse hammers. This means they were unable to hold big gains they achieved midway through the session. This is very bearish action considering the momentum these stock had generated over the past several session with potential breakouts of their respective triangles.

The rest of the market was on a mission to reach for the upper bounds of their triangle, but their 20/50 day moving averages were an obstacle that they simply couldn’t overcome. This is producing lower highs as we continue on this lateral journey which is indicative of more and more buyers simply giving up. Buyers are losing and the sellers know it, just biding their time. The longer we continue this long lateral journey, the harder we’re going to break out of this pattern, and right now, the bias of the break is down. It’s becoming more and more likely that we’ll see those November lows the more the bulls get rejected.

This Market Just Sucks the Life Out of You

What I mean is that this lateral movement of Apple (AAPL) and the markets is incredibly boring, and at the same time extremely nerve racking. Just about everything is trading within a range, all the major indexes, sectors and AAPL. With the S&P, the range is bound by support at 805 and resistance at 860. Then there's a smaller range within the range from 820 to 840. The corresponding range for AAPL is 80 to 100 and the inner range from 85 to 95. We just keep bouncing around, never making headway, never mounting any significant rally up or down.

I have five charts to show you of Apple (AAPL) from multiple time frames. This is pretty much my modus operandi when doing my technical analysis, to look at all the relevant time frames and see how they might influence one another. I also look at the sector charts if there’s an appropriate one, and the market charts. So, before we get into these AAPL charts, let me explain some of the things that guide the analysis.

The hierarchy of influence usually works like this; market over sector, sector over company. Then we have time frame to consider, where longer time frames usually exert more influence over shorter time frames, than vice versa. Keep in mind that these are guidelines, not rules. Now, one might argue that the action is all in the shorter time frame, which is true, but the momentum is with the longer time frame. So, monthly charts provide a longer-term outlook on the direction of a stock than weekly or daily charts. A concrete example would be that trend lines drawn on a monthly chart are less likely to be violated, than trend lines on a 30 minute chart.

On the heels of the worst possible news that an Apple (AAPL) fan could imagine, investors rebound the stock with seemingly little remorse. But is that what really happened? Did Apple investors simply shrug off the news of Steve Jobs medical leave of absence and pump the air back into the stock? Hardly. And if you think so, then you’re living with blinders on.

If you lived in a world where there were no other stocks or markets, as many Apple investors seemingly do, then you would have to believe that this stock is such a titan, with supernatural staying power, that not even the fall of the fearless leader can keep it down.

I have lived just south of Boston all my life. Every year I would wait in great anticipation for the Macworld Expo to come to the Bayside Expo in the summer. Some years it was so big, that it spilled over to the World Trade Center. When Apple (AAPL) decided to discontinue the Boston Expo, I was saddened because I felt a part of the Mac community was now dead. And my fear was that as the community became marginalized, that Apple would lose market share, which it did by the way.

Back in the early days of Mac, mid 80s to early 90s, there was a definite community. In fact I participated in that community in a material way. I belonged to, and was an active member in, the Boston Mac Users Group (BMUG), and I ran the MacMentors Bulletin Board Service, or BBS. For those too young to remember, BBSs were the precursor to the Internet. It was a dial-up service that was interconnected with tens or even hundreds of other like services. My BBS had four 2400 baud modems attached and over 2,000 users from all over the world. It was truly a community, with a self nurturing culture. I was also a speaker at several Macworld conferences and some of the New York City based conferences, and consulted in the field of electronic publishing.

I have no position in Apple (AAPL) right now, and haven’t for a few weeks. Why, you may ask? Because the short-term trend has been indeterminate, sideways and choppy at best. Over the longer-term, the downtrend is intact, albeit in a weakened fashion. And it’s very difficult to profit in this kind of environment, so I have been recommending cash to Apple Investors and my subscribers. But the downtrend is about to resume, and it’s time to take a stand.

In a sideways and volatile market like this, individual stocks can make or break you. There’s simply too much risk for the small investor to profit from individual stocks. Look at AAPL over the past week. It’s down just 0.5% for the week, but intra-week it has moved in a range spanning over 8%! AAPL started the week with a huge gap up, a very encouraging sign, as gaps can provide good support going forward. But it didn’t hold, as AAPL erased the gap the following day. Wednesday was a day of indecision, followed by a weak attempt to regain the gap on Thursday. But then Friday revealed the true intent of the market, and that’s to resume the overall downtrend.

This bear market started in October of 2007 and continues to this day. Apple (AAPL) lagged behind just a bit, as it peaked in December of 2007, but to this day Apple is in lock step with the markets’ fall. For Apple, there were many accomplishments, as it established a new mobile platform and new Macs across the board. It wasn’t without its hiccups, like the snafu resulting from the releases of the iPhone SDK and Mobile Me. But there were also great successes, like the iPhone App Store, world-wide penetration of the iPhone in 70 plus markets, and the huge gains in Mac market share.

But for all of the Apple successes, nothing could trump the total demise of the financial and commodity markets. Credit is frozen around the world, and demand for products and energy have disappeared as we have slip into a deep recession, perhaps even a depression. Housing has also taken a huge hit, nearly 30%, and it’s forecasted to take an equally large hit in 2009. It is unlikely that we will see any kind of recovery until we’re well into 2009, perhaps even into 2010.

Back on December 12, I declared that the Bear Rally was over. Although it may have seemed somewhat premature, especially after the auto-bailout injected at least some temporary life back into the market, it turns out the call was spot on. At the time my analysis was based on the Bulls' inability to hold the 20 day moving averages, and advance through the 50 day moving averages.

At the time of that rally ending call, Apple (AAPL) was at the peak of its rally, having gained nearly 24% off its November lows, at least intraday, by hitting 103.60 on December 11th. It was soundly rejected by strong resistance provided by its 50 day exponential moving average. The next day the stock and the indexes took a pretty good hit. That was my first clue, that if leaders like Apple couldn't break through such levels with all that momentum, and if the indexes couldn't hold their 20s, then this rally was a bust.

One week ago I posted that this bear rally was coming to an end. Actually the post was intended to be a scathing review of a few Apple (AAPL) analysts that are doing a disservice to investors by inventing this cloak of invincibility around Apple. Well, no company is safe in this market, least of all a consumer driven company like Apple. So, this post is further evidence that this bear rally has come to an end and that Apple is likely decline even further.

Last week we lost the 20 day moving average with some force. I felt at that time that it was just a matter of time before the markets moved lower to retest the November lows. But then we got an artificial infusion of hope from our government when the Fed cut bank lending rates to zero and the promise to throw everything including the kitchen sink at this economy. It was an act of desperation that is doomed to fail. In my view, the Fed has dealt its last card and has all but admitted that we’re heading towards a depression.

I really enjoy reading many of the Apple (AAPL) analysts out there for their product predictions, market analysis, and fundamentals research. It all makes for good fodder and provides a richness to my Apple knowledge. But they contribute absolutely nothing for me as a trader or investor. In fact, I find them more distracting than useful.

The fact is that most Apple analysts are ego-driven sycophants. They live for the power they wield, as their words can sway markets, and crush competitors. The problem is that the Apple analysts’ real job is to get individual investors to buy stock from their firms, and to work the agenda and spread propaganda for their best clients, the institutional investors.

Who wouldn’t feel good about a 12.5% rally? No one that I know! But what does it mean? Is that it, are we out of the woods? Have we averted disaster, can we all go to sleep at night secure that our economy is now on track? Not by a long shot! Think about it, what was this rally all about? Do you really think Apple (AAPL) surged on the basis of analysts' favorable outlook on MacBooks? I’m sure some investors thought that, at least those living in a bubble.

The entire market was up because of a myriad of reasons, the least of all was good MacBook news. We just came off a huge decline in the market, where we plunged through the 2002 bear market lows, became extremely oversold (meaning sellers simply ran out of gas), and snapped back on positive divergences. Then to fuel the fire we were at options expiration, shorts covered, Obama announced his “Economic Dream Team,” and the government bailed out Citigroup (C) with our tax money.

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).

I can, but first we have to deal with the next level of support, which is 74-ish. What really makes me a believer is how easily we broke through 85 yesterday. You know, 85 represents both long-term support, and an important psychological level. That’s because Apple (AAPL) hasn’t been below 85 since January 9th of 2007, the day Steve Jobs introduced the iPhone to the world. This Bear has essentially negated the iPhone premium. I want to make clear that these are the words of Rex Crum of Market Watch, not mine. Man, you’ve got to love that name!

How can this be? Apple’s fundamentals are strong, right? Yes they are. But that has absolutely no bearing here. Apple is simply falling with the rest of the market, and so long as there’s no confidence in the market, it will continue to fall. I suppose you could argue that Apple has taken more than its fair share, but trying to argue that point with the market is an argument you can’t win. You can only accept it for what it is.

The Trader is dead, long live the Trader. This is my official proclamation now that this Bear market has finally proven to us all that it is futile to trade in this market. Technical Analysis, economic reports, historical data - they all have little to no meaning while volatility is sitting above recent historical highs.

Just think about it. In the past couple of years we've had market ups and downs, where sentiment indicators like the Volatility Index and the Put-Call ratio peaked above certain levels we considered watershed events. We called it capitulation. And it was pretty well defined and predictable. Although in retrospect, we thought the world was caving in.

In this post I’ll recap the epic struggle between the Bulls and Bears last week. The latest battle was won by the Bulls as they fought off an attempt by the Bears to bring the markets down on Friday. I’ll examine how this struggle has been one of conflict and contrast. And on the Technical front we have two patterns competing for dominance.

We started the week on a pretty good high, with strong gains spilling over from the week before, and even in the face of extremely disappointing construction and manufacturing numbers, the markets continued to trend up, it seemed nothing would hold them back. The world markets were surging as well, perhaps in anticipation that Barack Obama would win the presidential election. The morning after the election (Wednesday, November 5th, 2008), it was sell the news. At least that’s how some had described it. I would say that we were extremely oversold, and a lot of nervous Bulls sought to book profits while the booking was good. The Bears seized this opportunity to take the markets down. So, for the next two days we had intense selling, and gave back nearly two thirds of the gains achieved since the rally began the week before.