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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 Has an Inside Day, Not a Good Thing

December 24th, 2008 • Related • Filed Under
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iTunes Store

An inside day is a Technical Analysis term that means the price action, from the opening and closing highs and lows of the day, were completely engulfed by the previous day. In other words the opening high from the previous day was higher, and the closing low was lower. Well, that’s exactly what happened to AAPL.

Some perma-bulls found solace in yesterdays price action saying it was a good day for Apple because it finished in the green. But only by a fraction of a point, unfortunately they refuse to acknowledge the bigger picture.

Some times an inside day can be a sign of indecision on the part of investors, or consolidation. But in this case it’s neither, instead it was an expression of exhaustion. Not only was it an inside day, but AAPL printed a black candle, were the open was higher than the close. And more importantly, the MACD on the daily chart plotted a bearish crossover. This all adds up to great weakness when this time of the year traditionally brings good cheer and Santa Claus rallies.

Click the image to enlarge.

 

Inside Day 

Apple had one thing going for it prior to yesterday’s (Tuesday, December 22) session, it was extremely oversold in the near-term time frames; the 15, 30, and 60 minute charts. But that indicator quickly unwound as there was relative strength to start the day, which wiped out the oversold conditions, followed by back and forth action for the rest of the day. Today (Wednesday, December 23), the day before Christmas, there’s no such advantage. AAPL is neither oversold or overbought, its RSI is sitting comfortably in the middle of its range in all the near-term time frames. Under normal circumstances I wouldn’t fret over such an indicator, but we’re in a Bear market and a strengthening downtrend. Apple needs all the advantage it can muster. And besides, in the daily, weekly and monthly time frames, AAPL has plenty of room for more selling to occur.

The most disturbing thing about the decline off the rally is that AAPL has given back 77% of the gains it got from the lows in November, to its high a couple weeks ago of 103.60. That’s well beyond any normal retracement. The irony is that Apple, by all accounts is a strong, flourishing company, a leader among leaders. Yet, investors don’t see it that way. They say the market looks forward 3 to 6 months. They also say that the market is never wrong. Is this a warning for Apple’s upcoming earnings and outlook? Or is this a horrible miscalculation by the market?

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  • gumdrop
    http://hotcandlestick.com/directory/Bullish%20T...

    Fool. Any idiot can get their investment advice from the internet.
  • Yes, and wouldn't you know, I'm on the Internet and thousands come here for my analysis. I'm glad you decided to finally contribute something to the blog. Your link looks to be a pretty good resource. Thanks. Just try to keep the vitriol to a minimum, it's very unbecoming.
  • gumdrop
    Right even better

    h t t p://hotcandlestick.com/directory/Bullish%20Harami.htm

    The fact that you are deliberately trying to mislead thousands of people with your weblog I find despicable and disgusting.
  • I'm sorry gumdrop, but you're exposing your incredible ignorance when it comes to technical analysis. This is not a bullish harami, as you indicate by your link. Please leave the analysis to experts. First of all, we printed a black candle, not a white one. Plus, the range of price was in the lower half of the previous day.

    And it is quite obvious that you have neither the skill or experience to level such charges against my analysis. Just because it doesn't agree with your jaded view, does mean that it's not correct.

    As it stands now, I have warned you too many times, and I'm going to moderate your comments. If they start improving, I'll let them through, but up to this point, you haven't provided any value to this blog, you've simply been an annoyance.
  • Greg
    Well it is an horrible manipulation process on Apple stock... Because so far the market has often been wrong (Check Subprime etc...) so i would bet on manipulation on the stock (Cf Jim Goldman comment) more then real trading on Apple. The low volume and the christmas period helps that manipulation.
  • Apple
    You do seem to slant your reporting to benefit your personal AAPL holdings at the time. If you are going to be an "analyst" of AAPL then you ought to do what other analysts are REQUIRED to do and post the positions you and your family hold in AAPL. The way you beat the drum about the downside tells me you have puts out on the stock right now. Drop the stock or drop the analysis because your advise is motivated by nothing other than your own personal gain. Shameful........
  • Apple
    correction: advice for advise
  • I have NO position is AAPL. I do have a small position in SDS, which is an inverse ETF that tracks the S&P 500. But your advice is sound, that I should disclose my holdings if I talk about a particular stock. In this case, I think I'm on good ground, as I have no position in AAPL.
  • Apple
    Appreciated.
  • Bryan
    The market has avoided the big down days recently. We are drifting lower but we are still above 850 on the S&P 500 so we are still in a bear market rally. The rally recently has been weak and we have failed to stay above some important levels but the downward pressure isn't nearly as severe as it was recently.

    I still believe we rally in Jan leading up to the 20th. After that we probably peak and pullback.

    Apple is absorbing the news that Jobs might be much less active in the company. That's the main reason it's weak right now. Yes, we had stories about possible weakness in retail but Apple of all companies is very strong. The stores are packed.

    Dropping MacWorld is a major disappointment. The only reason to do it is because Steve won't be around. It's such a cheap and exciting experience for the money. The stock is factoring in a transition and we may get news of that in a month etc.

    I'm all cash for now and looking for a rally and sharp spike up in the S&P very soon. I think we get to about 960-980 by late Jan. That's what I'm "looking for" right now.
  • Christian
    Zach,

    I like your blog and read it regularly. However, I've noticed over time that you're rarely right. Have you noticed that too?

    I'm sure you know more than I do, and perhaps you keep your best stuff for yourself, but it's nevertheless true that you're wrong far more often than you're right. And when you are right it's often not for the reasons you previously stated. It's usually an occurrence of events that had nothing to do with your stated theory.

    I know it's terrible to just leave a negative comment with nothing constructive. However, seeing as you have thousands of readers and having some experience with blogging myself, I'm sure you know that the people who come to piss on you are just as valuable as the ones who agree with you. I mean, hits are hits. As such, I'm very sure you don't let it get to you.

    I'll keep reading-- mostly 'cuz you link bait with APPL and I read any scrap I can find on 'em-- so keep up the typing.

    BTW, if the market is always right how do you explain the current state of affairs? I mean, it's VERY safe to say the market did not see the current situation coming, but rather reacted to it once it was upon us.

    Moreover, there was NO WAY the market was looking forward 3-6 months back in May, June,July, to Nov. NO WAY AT ALL. You're just plain wrong about that. Maybe you can show me some fancy charts that show that back in June the market saw this whole mess coming, but I doubt it. Sure there were some canaries in this coal mine, but "the market"? No. You included.

    In May you were absolutely NOT saying "come Nov. we'll see huge lows, major banks failing, 500,000 jobs lost in a month, the Dow off 40% and Apple at 85." You were NOT saying that.

    I know 'cuz I read your blog.
  • Hi Christian, excellent comments.

    Doing Technical Analysis is like doing what a weatherman does. If you've noticed, a weatherman is never 100% correct either. It's like a weatherman, because you take the best information available, apply well known models, patterns and experience and you come up with a prediction that is predicated on probability. So it's not a matter of being 100% right or 100% wrong, it's a matter of degree. Just as in the weather, there are too many factors that influence the markets to predict with 100% accuracy, but it is possible to identify trends and probable outcomes to a fair degree of accuracy. Enough at least to make intelligent investment decisions.

    As far as the market always being right and looking forward 3 to 6 months; If you were to look back in early september, I posted a series of articles warning that we were headed for a crash. One of them was entitled "Fasten Your Seatbelts, Put on Your Crash Helmets." At that time the market was giving clear signals that things were falling apart. Just as I suspect some time in mid to late 2009 the market will start to rally out of this bear, yet the economy probably won't turn for several months afterwards. One other big prediction that was spot on, was when I called an end to this bear rally back on Dec 11th. Other than that, most of the day to day stuff is like a weather vane, although I have to take exception, because I believe I've been better than 80% correct the past several months. If you could site specific examples, then I will address that.

    And when I say that the market is always right, I'll have to admit that it's a form of rhetorical speech. But the fact of the matter is that the pricing of equities reflects supply and demand, as well as the sentiment of the mob of investors that make up the market. If an equity like AAPL falls to ridiculous lows, even though the fundamentals don't justify it, that's the supply demand equation at work. There's simply not enough buyers willing to pay the price, so that's why the price is what it is. Just like buying a house. You may think your house is worth $650K, but if no one buys it until you drop the price to $600K, then you've found what your house is really worth, regardless of the improvements you put into it.
  • marcos
    You are making me rethink my $78/$80 prediction to something much lower. I appreciate your comment about exhaustion. The market bears should soon be exhausted, too. Its not the normal frame of mind for most investors to be bearish. Did we ever get close to 'capitulation' from bulls? well not yet. But we might be getting close to 'capitulation' from bears as a false sense of euphoria and hope begins to take over the market with the inauguration of our newest soon-to-be-worst president .
  • tomtom
    you're going bust zachhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh. You are also lying about your Apple positions that you take up regularly.
  • bobseadoo
    Its not miscalculation by the market.......... it's MANIPULATION by the market!!!!!
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