Thursday, November 15, 2012

Falling Apple.

Someone has literally yelled fire under Apple stock and the stampede to the exit is resulting in casualties.  What happened to all those projection of $ 1000? Why those analysts are not being shamed publicly? But that is Wall St. for you and that’s what all the talking heads do in the various 24/7 TV channels. Sell snake oils.

If you are holding Apple and find yourself at a loss position, there are two alternatives. Depending on what is your cost, cut the loss. But if you are still holding it now, you may want to hold it till next April-May. Apple will definitely retest $ 700 before we can call it’s all over. 

As of now, I am very disappointed with the bears. Over 60 days ago we had the high in SPX and so far we are down only 8%. It is not even an official correction and McClellan Oscillator is down oversold. It is time for a bounce because there is not much scope for more downside.

On a daily chart, SPX is down almost 3% standard deviation. It will be nice if we get a panic low of another 10 points and I am hoping we will get that low tomorrow. But even otherwise, we had a intraday low of 1345 in /ES (emini or spx futures) and my downside target is around 1340 in futures. So we are very close to a bottom and may be the bottom has been reached or we are almost there. In any case the divergence in VIX is quite telling and I do not how to explain it except that may be smart money knows that a collapse is not yet imminent.

(H/T John Kicklighter)

Both Gold and Nat.Gas had a bit of sell off today. As of now I am looking for $ 4.00-$ 4.10 as the upside in Nat.Gas which is about 8%-10% from here.  We already had 10% upside from $ 3.40. That is more than the downside correction we had so far in equity indices. Gold is suppose to have a bounce in the next two weeks and the moot point is whether it will close above $1800.

Crude again sold off today. What happened to all those shrill cry of all out war in Middle East and crude going through the roof? I think cycles know best. While a bounce in crude is due now along with Euro, the down turn in crude is not done yet.

Except AUD, all other pairs are at odds with the equities. Euro is making good progress against US $. Whatever happened to the collapse of the Eurozone? But we do not want to go long in Euro because this bounce is just that, a bounce.

Overall, I am looking for a quick bottom by tomorrow and a short term bounce. The magnitude of the bounce will tell us if the correction is over but I think we will see more selling after the bounce. Normally the lows will be retested again before we can have all sorts of divergences. And the fiscal cliff is very much a possibility and not sorted out. Many big funds have already sold some of their portfolio and they will sell again in December. So we are not done yet. Like I said yesterday, it will be prudent to reduce the exposure in equities but I don’t buy the collapse scenario yet.

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