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Zach Bass (a.k.a Ernie Varitimos) is Chief Bloviator of Investor in the Wilderness. He has 30 years experience as a Tech Maven, Investor and Consultant. Zach has been using Macs since their introduction in 1984, and investing in the markets just as long. His mission is to help guide all level of investors through the Apple Ecosphere and make sense of the markets. Zach's take on Apple, the markets, and life pursuits, will keep your mind tuned.

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Apple Investors, Extremely Low Volume, But That’s a Good Thing

August 24th, 2008 • Related • Filed Under
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Before we get started with the analysis I need your opinion. Did AAPL and the markets simply throw a head fake last week? Was losing critical support just a temporary blip on the path to higher prices, or are we backtesting that uptrend established over the past six to seven weeks, only to fall under the pressure of financials and inflation?

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The downtrend call I made last week may have been premature. But I’m conflicted with the poor market internals and the very weak volume to declare that Friday’s performance means we’re going higher. AAPL definitely did not have a stellar week, and Friday’s action was a roller coaster ride, showing little conviction. The S&P, Naz and Dow finished the week strong, but they were still well off the highs of the previous week, and volume was pathetic. In fact volume was lower on the Naz than with any other session this year so far.

To add to this uncertainty, AAPL daily charts have been plotting nothing but Doji and Spinning Top candlestick patterns over the past seven trading sessions, that’s a sign of investor indecision. And on top of that, the trend is still down over the period. Should I feel good about that? Well I don’t, particularly in light of the muted 20 country iPhone launch, which I felt investors had already baked into the price and discounted long ago.

What I do feel good about is that AAPL is forming a Pennant with declining volume. So perhaps this is merely a pause in a strong uptrend. Pennants are usually preceded by a strong advance, and typified by declining volume. See the chart above. Also, we have the positive divergences on the weekly charts that I feel are starting to play out on the Tech sector, energy services and commodities.

Most Investors are focused on two things right now, the financial situation and inflation. So I feel Friday was a lift of the spirits, as Ben and company indicated that rate increases would not not be considered anytime soon, and that they “had a plan” for any pending trouble of an unnamed financial institution.

The other air of hope was for inflation was via gas prices. It was amazing how that huge advance Oil made on Thursday was completely wiped clean on Friday. I don’t recall ever seeing such whipsaw price action in Oil. Where was the news that spurred that on? You gotta wonder if the cat and mouse game that Russia is playing with Georgia is losing it’s impact on the world stage.

There was definitely a lift from rumors that Lehman may be settled by foreign investments, or the Warren Buffet may rescue it. I think investors are pinning hopes that one of the big financial outfits will simply be taken off the books, then we can all move forward.

So this is why I need your help. I see good and bad in this market. I see incredible turmoil throughout the world, but also technicals that are pointing to significant upside potential.  At this point if I had to take a stand, I would say that my call for a new downtrend was wrong, and that we’re merely pausing and taking a breather, getting ready for a strong push forward. Let me know what you think, will ya?

By the way, I’m back from vacationing with my wife, kids and dog on the Vineyard. We had spectacular weather the entire two weeks. Thanks for putting up with the photos. I’ll leave you with this last one of my dog Gyasi the Ridgeback as the feature photo.

If you’re looking to become a better trader, and how to best navigate turbulent markets, and most importantly, how to keep the money you have, then you should check out the Wilderness Investors Group. Click here to learn more and request membership. We have a vibrant community of professional and individual traders where you will learn how to exploit the markets and master the secrets of the trade.

More on this topic (What's this?)
Buy, Sell or Hold: Apple Inc. (Money Morning, 11/10/08)
Apple (AAPL): Steve Jobs' Replacement? (market folly, 11/19/08)
7 Great Lessons to Learn From Apple in the Last Year (Stock Trading To Go, 9/29/08)
Apple (AAPL) at Make or Break Point (market folly, 9/8/08)
Read more on Apple, Inflation at Wikinvest

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