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Markets Still Trending Up Despite Faltering Leaders

Just look at the monthly chart for AAPL.

It is at double top.

Nothing goes up forever. Corrections or consolidations will be needed to refresh the rally and apple is in a 4-th wave process on the monthly chart.

Look at the 2-nd wave of AAPL. It consumed 3 years. 4-th wave usually consumes more time than the 2-nd wave. AAPL so far has expended almost 2 years preparing the 4-th wave. More to go.

Technology Names in the 52-Week-High Club, But Is This the End of the Rally?

If more companies are making 52 weeks high but are still underwater from their Oct 2007 high; it could mean that they are gaining strenght and more chances of sustainable recovery rally.

Key word is Recovery Rally off the bottom rather than All Time High rallies that is susceptible to a meltdown. In order to be able to recover and prevent a double dip; more strenght will be needed to get out from the pit rather than a show of weakness.

At this stage, more companies making new 52 weeks highs is a welcome sign of recovery. Once they make minor or major pullbacks as opposed to a meltdown; traders and investors will be on the lookout to buy the first opportunity of trying to get prices not too far away from the bottom.

End of Bubble Rally is when there are too many companies making all time highs such as in year 2000 and in 2007. It is just a natural cycle of stock markets; rallies need corrections in order to sustain further rallies. Nothing goes up forever and none goes down forever too in the general sense of the whole stock market landscape such as the major indeces INDU, SPX, and COMPQ.

Those who cannot understand the difference between a bottom up rally to an all time high rally are interpreting that this rally is already in a bubble territory.

Far from the truth. Just look at the monthly charts, most stocks are still trying to rise from the bottom after an 18 month of scorching selloff. Looking at the daily charts is very misleading and good only for short term trading but not for long-term investment purposes.

Buy low is still the mantra at this stage, then sell high in probably another 3 to 5 years of rally for short-term investors.

For long-term investment, we may never see SnP 667 level again in this century just as INDU low of 42 in 1932 and the 570 low of 1975 were never visited again during the last century and in almost all probabilities will never be visited again until doomsday come.

If this SnP double top pattern on the monthly chart is to be compared to the multiple tops of 1,000 for INDU during the 1965 to 1970's period; then we may not revisit SnP 1,576 level again for more than 20 years into the near future and possibly in this century once we break above that level which is projected to happen by year 2014. SnP500 is a relatively young index as compared to Dow Jones and it is the major index favored to lead the US stock markets into the near future.

The dot.com bubble burst has taught many tech companies not to burn their cash reserves at prodigious rate and they were able to learn how to make profits instead of making empty promises during the 2002 to 2007 of 5 year-bear rally. Compq is still a very young index with lots of potential growth in the decades and centuries ahead.

Now that the housing bubble has bursted; it is a double whammy lesson for everyone to remember for a long long time into the next decades as long as those people who survived this 9 years of secular bear market lives and be in control of the government and the economy. They will learn how not to spend as if there is no tomorrow but rather how to save and how to make sustainable profits not only for the short term but for the long term (much like what the surviving tech companies did in 2002 to 2007).

Technology Names in the 52-Week-High Club, But Is This the End of the Rally?

What scorching rally?

Where is SnP now? At 1068 level.

It took SnP 28 weeks to go up from the bottom 667 to 1068.

It took SnP less than 22 weeks to go down from 1068 in Sept 2008 to 667 of March 2009.

22 weeks of SCORCHING SELLOFF to reach the 667 bottom vs. 28 weeks of ... well should we say tediously SLOW RALLY off the 667 bottom to current level of 1068.

Unless you look at the hard data using the weekly or daily charts; you cannot gauge objectively what is actually happening.

We have to rally faster in order to recover massive lost ground just to be able to match the bears' scoreboard.

Like what they say: When the going gets tough, the tough gets going.

Is the United States still tough enough this time around?

Smartphones: The Mobile Industry Is About to Get 'Blown Apart'

Mobile phones trying to do what the PC can do and more.

Problem is the screen is too small for many applications the computer can do and PCs are requiring bigger screens with the 24" LCDs starting to become the mainstream these days.

More applications will be developed for the PC as the screen gets bigger while the mobiles are starting trial and error introduction of web-based applications much like the younger years of the PC.

It remains to be seen if the Atom CPU from Intel will become powerful enough to enable high powered PC applications on netbooks or notebooks. That is the "ideal" compromise between PC apps and mobile's maniaturized apps.

Somehow, if they really want to bring the power of the PC into the mobile phones into the immediate future, they will have to connect the PC and mobiles wirelessly through software and using the mobile as the maniature command and control center for the PC to do the high-powered data processing tasks and providing the mobile with the end results through the internet.

The technology in controlling the PC through the internet has been around since the internet has become an integral part of the PC and has been the fascination of many hackers early in this century.

Definitely, the mobiles simply cannot have the horsepower needed to run many PC-based applications and thus will be limited to the most manial tasks to date. Thus, important data that needed high powered processing cannot be carried out while "on the road" preventing a lot of applications to be carried out extensively where-ever and when-ever people may need them. Cloud computing for the mobile phones - anyone?

Tell that to the mobile phone innovators. They will need more "hard-core" programmers to the job.

Week in Review, Part I: Global Economics, International and U.S. Equity Markets Overview

China's Shanghai and Shenzhen indeces and the Taiwan $TWI index are the only green shoots in this otherwise weed infested global economy.

They have been springing greens shoots since October of 2008. 6 months of back-to-back rally cannot be discounted as a "bear rally" but rather can be categorized as a sustainable recovery rally. Shanghai was able to achieve 54% rally since Oct 2008 and the Shenzhen index 92%. Those are the A-shares. The B-shares are able to go much higher than the A's.

That is something not lost to international investors. Such massive rallies will generate massive re-investments into China. Just wait for a pullback in order to enter.

China because of their $600B stimulus package which is equivalent to $1,800B to the US since US GDP is 3x bigger than China's. Just imagine what $1.8 Trillion of stimulus package can do for the US if the Obama Team simply matched that of China's on the per GDP basis. But then the US can't possibly afford a $1.8T stimulus package.

And China is using that $600B on infrastructure projects which are much more stimulative than the US's $787B to be used basically on pork barrels since the US is already a well-developed country and may not need extra infrastructure projects but rather the usual maintenance jobs of those infrastructures which is not stimulative but rather preventive.

Taiwan is getting the boost because of the perceived easing of trade barriers against China. $TWI was able to rally 53.50% so far from Nov 2008 lows. It is going to need a minor consolidation before the next small rally on the weekly chart. After that, a bigger consolidation will be needed in order to support a bigger rally.

US and Europe are in no shape to recover immediately. Their economic fundamentals do not support a sustainable recovery and that show quite clearly on the monthly and weekly charts of the Dow Jones, SnP, Compq, DAX, CAC.

Likewise, the monthly and weekly charts of Japan, Hongkong, Korea, India, Australia, among others are still in shaky grounds and are more likely to go down to lower levels. Those countries are basically being driven into an unknown direction with China being bullish on the long-term and the US and Europe bearish in the intermediate terms.

The low volume in the US indeces during the last 2-3 weeks is because of a running consolidation some traders are calling a wedge but is starting to morph into a running triangle specially for Dow Jones daily and 240-minute charts. (See my previous posts on how this type of triangle usually resolves.)

China is going to finish or complete the current 6 months of back to back rally very soon. Rallies do not go on forever, corrections do and will happen no matter how bullish the rallies are. Besides, bigger corrections are needed in order to sustain bigger rallies in the future.

China's impending correction on the weekly chart is going to produce massive downward pressures to the Asian countries' stock markets including Japan. Then their "shaky" green shoots' viability will be subjected to the acid test specially if the US and Europe go into another sell-off as China goes into a pullback.

The US has been showing some "green shoots" lately. Late already as compare to China's and still highly questionable as to sustainability. Impressive as it is with 28.4% price appreciation since March 2009; Dow Jones' 8 weeks of tentative rally does not make a sustainable recovery.

Dow Jones will need to go over 10,590 on a sustained rally with minor corrections in the weekly chart before it can be considered safe and sound with more than 90% probability of sustainable rally in the years ahead. Minimum 1145 for that of the SnP500.

A minimum 63.70% rally from the March 2009 low. A tall order with very little chance of becoming a reality at this stage. We'll believe it when we see it.

This is not a garden-variety recession where 20+% rally means the end of the bear market. 28.4% rally for Dow Jones does not mean the Bear Market has already ended.

The western world is still deleveraging or "going back to basics" - Back to the Past, not the Future.

Next year perhaps, we start going back to the future.

China and the rest of the developing world are going more for bricks and mortars in replacement for their mud-huts and bamboo houses. They still have a lot of ways to go towards becoming developed or industrialized countries with the attendant consumerism boom in their respective countries needed in order for them to sustain their economic growth outside of the US and European consumers.

Thus, they are expected to resume their early 2000's rally with perhaps less vigor this time around since the US and European consumers will not be the same again for quite a long time to come.

Hopefully not until next year's expected rally, if it happens, will we be more comfortable that the US problems are psychological rather than systemic.

Sirius XM Has Long Term Staying Power

39 cents is the long-term resitance for SIRI on the monthly chart. It is the last low of 2003.

Notice that SIRI has been going down since late 2005?

That is one reason why it was able to get up earlier than Dow Jones and SnP in this current downturn. Time is also a major factor in analyzing stock price performance - not only price. Time consumes so many good and bad news, provides the knowledge and experience for the people involved, and enables either bankcrupcy or recovery with higher probability rather than confusion that short-term knee-jerk reactions usually generates.

Looking at the daily chart, the rally from 0.06 to 0.23 is a typical V shape rally. Then the rally from 0.12 to 0.43 was able to penetrate 0.39 slightly with sharp sell-off when it went below 0.39 since most long-term traders will have to react to that re-entry below 0.39 and will automatically protect themselves no matter what.

What most traders do not know was that the rally from 0.12 to 0.43 was an extended 3rd wave in Elliott Waves analysis Extended 3rd wave is very useful in sustaining the rally and/or overcoming major resistances for the bulls (it works for bears too). Extended 3rd wave runs have more than 90% chance of making a 4th wave and the 5th wave for the usual 1-2-3-4-5 rally. For non-EW practioners, they usually call the 5th as the follow-up rally after an extended rally.

SIRI has now in the process of completing the 4th wave if not already done so. Next target for the 5th is 0.51 with increasingly lower probability of reaching 0.62 which is the usual maximum 5th wave run when the 3rd is already extended. More than 0.62 run up for the 5th can happen due to excessive exuberance. But that type of rally is a two-edged sword - the resulting pullback can be very punitive and dibilitating for the rally's own survival. Hope SIRI don't go over 0.62 on the next rally before the next bigger pullback happens.

Once the 1-2-3-4-5 rally in the daily chart has been set. The pullback after that sequence becomes a high confidence buy for bottom fishers who missed the initial V-bottom and the initial pullback off the V-bottom rally or for those who wanted to wait using time as a guage of success or failure.

SIRI is not out of the woods by a long shot.

A major determining factor for recovery rally is the time consumed during the last sell-off and the time consumed during the attempted recovery rally.

Looking at the monthly chart of SIRI. The last sustained sell-off started in Mar 2008 to Feb 2009 or 12 months starting from $3.89 to $0.05.

SIRI will have high confidence recovery rallies in the years ahead if and when it is able to rally for 12 months or less to $3.89.

Once that has been achieved; the next objective will be the $9.43 handle of 2003 to 2004 bear rally top.

Expect shallow correction if and when $3.89 has been achieved and deep correction if and when $9.43 is achieved.

Good luck to all SIRI steadfast followers.

Their dedication to SIRI was the only reason I bought SIRI closer to the bottom and specially when bankcrupcy news started erupting all over the place.

Wall Street Breakfast: Must-Know News

The panic sell-off today is not entirely surprising.

I have been arguing in previous posts that the next catalyst or "stimulus" for a sustained market meltdown is going to be big companies (out of financials) going bankcrupt with GM as the most obvious candidate sitting right into the middle of the cross-hairs.

Non-financial companies going bankcrupt will exacerbate the unemployment problem since they hire more employees per unit income as compared to the bank, brokers and insurance companies.

Companies other than financials are burning though their cash reserves at unprecedented rate with no alternatives available for shoring up their resources in this equally unprecedented economic crisis with the market downpour now entering the 19th month of unrelenting sell-off. They are also demoralized at the current stage with the massive public outcry over government bail-outs of the financial firms. Their chances for possible gov't assistance is in great jeopardy if and when they start reaching insolvency stage caused by sustained consumer spending crunch of which the economy is 70% dependent.

This is not the start of a sustained market meltdown.

The Obama administration has found a "palatable" way to provide assistance to GM for the next immediate future by asking Wagoner to step down.

This is not the solution to prevent big companies outside the financials from going down the drain.

The government has to either provide a Comprehensive Economic Recovery and Stabilization Plan or they do it peacemeal starting with an Economic Re-investment Program.

The Comprehensive Economic Recovery and Stabilization Plan is going to take considerable time to outline and be able to establish specific courses of actions.

The Economic Re-investment Program can be initiated immediately. It requires establishment of an FDIC sponsored and guaranteed Private-Public Bank that will provide immediate capital infusion to distressed companies both financial and non-financial if and when those companies start needing fresh capital support and to provide fresh capital to new businesses.

This approach should be able to arrest the mounting unemployment and create new jobs needed for an economic recovery and stabilization for the immediate future.

The Private-Public Bank will be co-owners of distressed companies and are entitled to future profits and dividends if and when those companies become profitable again.

Likewise, the Private-Public Bank will be exempt of all taxes and fees regarding all profits, capital gains, interest gains and other potential future rewards as a part of of the deal to encourage private investors as well as individuals to participate in Saving America from a potential major economic dislocation that can threaten capitalism, the government, and Democracy itself.

It is hightime that both the government and the private sectors stop and reverse this economic downturn that is going on for more than 18 months - and prevent potential civil unrest that can lead to rebellion as the government got entangled with using the taxpayers' money as a means of stop-gap measure for helping the finance sector.

Apple: Like Starbucks and Whole Foods, A Trend That's Past Its Prime

The last major consolidation for Apple took 3 years (yrs 2000-2003) before the massive run up from $6 to $200. Unlike the Dow Jones, SnP, and Compq which produced an ABC corrective run up from 2003-2007; Apple made a 1-2-3-4-5 impulsive run which denotes a 3rd wave run.

Highest probability is that Apple is now on the A wave of the ABC of the 4th wave down on the monthly chart that has consumed 1 year so far. 4th waves typically consumes 100% to 300% of the time the 2nd wave consumed - meaning Apple should go thru at least 3 years of consolidation period before the next rally. Highest probability is 162% of the 2nd wave which is almost 5 years corrective process.

Projecting on the future. What can possibly cause Apple to be able to stage another rally after 5 years of consolidation including the 1 year consumed so far?

The days of the mobile phone is nearing or have already completed it's height and is now practically going thru the initial stages of long-term corrective process. This process is going to force most companies in this business to look for the next big thing.

Likewise, the mobile phone will never be as productive or as versatile as the personal computer except for it being mobile which the PC or laptap cannot match.

Next will be the Notepad or notebook computer which combines both traits and capabilities of the PC and the mobile phone. Imagine carrying a notebook PC instead of a briefcase or a heavy laptop with a maniature mobile phone (1/4 the size of current mobile phone attached to the n-PC). You will not need a laptop or a mobile phone or a briefcase for that matter. n-PC becomes the de-facto textbook and notebook for students as well.

It will take time. Intel Atom CPU is still in the early stages of development and is still not capable of providing satisfactory speed and energy efficiency for current and future use. Likewise, battery storage capacities are still too limited for extended all-day usage and are still too heavy and bulky to be worth carrying all the time. Likewise, the harddisk is still in the infancy stage for transition from mechanical to purely solid state which is going to reduce both energy consumption and weight of the current harddisks to a fraction of what is currectly available at affordable prices. Intel is going to release the SSD later this year and is expected to revolutionize the harddisk much like the core2 duo did with the CPU. But at $500-600 range, it will take considerable time before it becomes cost competitive with the cheap mechanical harddisks of today.

Give it time. Apple is still the most creative of the bunch sans Steven Jobs.