Important Juncture … And Apple
Gary Kaltbaum is an investment adviser with over 25 years experience, and is a Fox News Channel Business Contributor. Gary is the author of The Investors Edge. Mr. Kaltbaum is also the host of the nationally syndicated radio show “Investors Edge” on over 50 radio stations. Gary is also editor and publisher of “Gary Kaltbaum’s Trendwatch”… a weekly and monthly technical analysis research report for the institutional investor. If you would like a free trial to Gary’s Daily Market Alerts click here.
My job is to figure out how the market is setting up, how sectors are setting up and how individual stocks are setting up…all the while drowning out all the over-the-top noise coming out of the pundits on Wall Street. The last part is easy as I listen to no one. I just watch the market. Markets set up in a certain way when they want to go higher and another way when they want to go lower. Then there are the trading ranges which can be a pain in the rear if you trade too much. I would rather attack when the market gives me the solid set-ups I need to see …and not before that. Thus, many times in the past, I take a step back and do nothing while those who have overtraded tend to be carved up. The past few weeks is one of those times.
The market is now at an important juncture where I believe the next move wins. This is what happens when the rangebound action tightens up not just in the market but in individual stocks. The good news is that the leading index right now, the RUSSELL 2000, bounced nicely off the 50 day average on Friday. I am hoping this augurs well for the rest of the market but need a couple of more cards coming out of the deck. The bad news is that one or two bad days and look out. The next few days or the next couple of weeks is that important. Bad areas like the FINANCIALS, SEMIS, HOTELS, FERTS, AIRLINES, METALS/MINING are offset by good areas like HEALTHCARE, RETAIL, DRUGS,FOOD,BEVERAGES,TOBACCO and the other stuff that is working. The OILS are also on the cusp here as they were slammed early last week. Any more selling here could put the fork in them for now. Keep in mind, the NDX is laboring because of APPLE and now GOOGLE.
It is simple on whether or not the market gets another move higher. ONE STRONG UP DAY could do the trick. On the other end, watch last week’s lows. If they are taken out, odds favor a move towards the lows of mid-March. Last week’s lows are S&P 1302…DOW 12,163…NASDAQ 2733.
As far as APPLE:
It is important to recognize when a great stock is potentially done. As always, the first thing to occur is that it breaks the 50 day/10 week. It will then start losing relative strength. In other words, market goes up, the stock doesn’t. Market goes down. The stock leads down. This occurred with the FINANCIALS throughout most of 07 when they wouldn’t rally when the market rallied and led the market down when the market corrected. The other part of the equation you need to know is that great stocks will top out on great earnings. The issue is that the market is looking forward at something…namely a top in the rate of growth…which may or may not be happening with APPLE. On top of this, APPLE is probably the most overloved and overowned stock I have seen in ages. When EVERYONE owns something, there is nobody left to buy…thus when a top comes in for any reason, it heads lower. Throughout the topping process, you will constantly hear analysts reiterating they strong buy and buy recommendations…and not until the stock is crippled will they come off those recommendations. This usually occurs only after a stock is down 30-50% and sometimes more. As far as investors go, unfortunately, most do not know this process of topping so they continue to listen to those that will soothe their minds by telling them everything is fine…when the stock is screaming something else. They will continue to hold and hold and hold because it is APPLE…the stock can’t go down…right!
Right now, APPLE is going through this topping process. As of this second, there has been nothing but distribution in the stock heading into the all-important earnings which is coming out soon…and CAN CHANGE THE PLAYING FIELD and get the stock back in favor. I predict nothing! In fact, if APPLE gaps up on earnings, I may look to rebuy it. I am just letting you know it is now to the point where even when the market rallies, APPLE not only does not go up, it heads down. This is a major change from the past. And this is occurring while the stores remain packed. I will be watching APPLE’s earning’s reaction very closely. They have done a great job at sandbagging their earnings by guiding ridiculously low and then blowing out the estimates created by APPLE themselves. It won’t be the news. It will be how APPLE stock reacts to the news. Very important support for APPLE sits at $326, just below Friday’s close.
As I am sending this out, S&P has downgraded U.S. debt to negative causing futures to get smacked. Just remember what I have said for years. IF THEY DON’T STOP THE SPENDING, EVENTUALLY, THE MARKET WILL STOP THEM. Merrill,WAMU, Countrywide, Wachovia, Lehman and Bear Stearns did not go out of business. The market put them out of business. I will have more on the Washington corruption and nonsense in a report later this week.
Gary Kaltbaum owns Kaltbaum Capital Management, LLC (“KCM”), an investment adviser registered with the U.S. Securities and Exchange Commission. The opinions expressed herein are those of Mr. Kaltbaum and may not reflect those of KCM. The information offered in this publication is general information that does not take into account the individual circumstances, financial situation or individual needs of an investor. The information herein has been obtained from sources believed to be reliable, but we cannot assure its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Any reference to past performance is not to be implied or construed as a guarantee of future results.