The 2002 Bear Lows Blues [5:59m]: Play Now | Play in Popup | Download (264)

Well Apple Investors, I must say that things were looking pretty tantalizing going into the close today. It looked like there might be an opportunity for a quick 1 to 2 day trade setting up. There were all kinds of confirming indicators, like positive divergences on the RSI and MACDs of most of the indexes. And although the advance-decline line wasn’t spectacular, it had gone slightly positive going into the second half of the trading session. We haven’t seen that combination for quite some time.

So at about 3:40 I decided to draft an email alert to the Wilderness Investors, letting them know that we might have a small opportunity to make a buck or two. That things were setting up for a near-term rally. Nothing big, mind you, that’s why I was very cautious in the alert, and said that it wasn’t worth throwing any money at it other than pocket change. I believe I said a 100 bucks. And I did spell out all the caveats. By the way, I didn’t push the send button until after the market close.

Right after writing the note I had to pack up and go home. So, I didn’t get to see the close. When I got home, my jaw dropped! To my dismay, in the time I had started writing the note, to the time the market closed, the S&P went from essentially even, a no gain day, to a 3.2% decline! But that’s not the worst of it, not only was it a huge loss, but we also broke through an important support level (850) on the S&P as well, all in one fell swoop!

The next level of support on the S&P is 839, which is the low of this Bear and the last bastion of support before the 2002 Bear lows. There’s a consensus among many Technical Analysts and big desk traders that 786 represents critical support. But the ultimate low of 2002 is 775.68, and that is the bottom line! If we drop below this level there’s a world of worry ahead!

So, what happens if we drop below this level? That depends on whether we close below 775, and if we close below, the next question will be, how long do we stay there? The longer we stay below 775, the more dire the situation gets. If we stay below 775 for any appreciable time, let’s say more than 3 days, then we’ll go much lower, probably too low to even speculate.

So how low can AAPL go? Wilderness member Kevin asked this question in an email yesterday. I answered by posing a few scenarios. The first scenario is upon us, and that’s losing 850 on the S&P. From here, if we lose 850, then I see us losing 92 on Apple. If we lose 839 on the S&P, then I see AAPL falling below 85. And finally, if we move to the 2002 lows of 775, then I believe AAPL will fall to the 74-76 range.

Now I didn’t present a scenario below that, but another Wilderness member Joe, wrote in the Wilderness forum that he sees AAPL going to 55! Now Joe has been pretty spot on with the lows we’ve attained so far, so even though this level seems unthinkable, so did 85, but Joe called that level too, and we hit it. Joe, I hope you’re wrong this time!