Bullish Cross Live

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THE LIVE BLOG 9:30 AM – 4:00 PM

9:01 AM – As we explained yesterday, Thursday’s session is the best set-up for a bottom that we’ve ever seen. Not just in this correction, but in any recent Apple correction. It had everything going for it. Even far more than what we had going for it last Friday. I know it’s difficult to believe given how bad the selling has been this week, but what you need to understand is that Monday – Wednesday, we didn’t have a set-up of any kind. Thursday we did. Last Friday we did.

The biggest indicators for an Apple bottom on the daily chart are: (1) Apple being under a 30 RSI; (2) Apple closing deeply below its lower b-band; and (3) Apple closing under a -30M Chaikin Oscillator. Those three things are the biggest and most reliable indicators for a bottom. We haven’t had all three line-up together. In fact, we have every indicator in the book lining up on Thursday.

Notice Thursday was different than any previous day in this correction. The only times I’ve seen anywhere close to the set-up was when Apple closed at $610 that one Friday and was up $25 on the following Monday. And on last Friday where it closed up $8.00 on the following Monday. And even those days weren’t anywhere close to what we have now. What was missing on Friday? Well for starters, we didn’t even have a -20M Chaikin Oscillator. A -20M is considered pretty oversold and a highly reliable indicator. We have -30M right now. And if you observe the recent past (post-crisis) that has meant an immediate bottom for Apple. -20M is pretty solid and -30M is extremely reliable.

So here is what we have right now:

1. Apple closed at a 24 RSI on the 14-Day

2. Apple closed at a -30M Chaikin Oscillator

3. Apple closed $12.00 below its Lower B-Band

4. Apple hit a low 12.12 P/E Ratio

5. Apple’s 60 Minute RSI is at 20

6. Apple is at key support at $530
Apple has retraced it’s entire gain and now back to it’s key support low of $530 a share in May. This is an extreme of epic proportions.

So these are the major bottoming indicators that we have in front of us. The stock is also down about $90.00 in 10-days and $170 from its peak. The correction is now 22% in length. We’ve seen corrections like this before with Apple, just not in the post-crisis era. In the pre-crisis era, 20% and even 40% corrections were normal for Apple. But they all preceded a huge rise in value. Apple has about 46 trading sessions between now and January expiration. In most cases, the immediate recovery tends to be the largest and then from there we will have to see how things sort of play out. The next 25 sessions will be extremely crucial for January spread holders. Because if Apple is able to really back up to $630 a share within the next 25-sessions — which trust me isn’t even that difficult for Apple it can be done in far far far fewer sessions — then all of our January spreads will be reasonably valued.

The good news is that I do think that the worst is behind us now at this point. We even had a huge volume spike in yesterday’s sessions which indicates exhaustion. It also indicates that it may have been the lows. It’s as good a chance as any. It’s important to understand that there was no real set-up in Wednesday or Tuesday’s sessions. Or throughout last week. We’ve only ever had like 3-4 total set-up days in this entire correction. Yesterday’s was at the top of that list. It was at the top of probably any list of potential bottom set-ups for Apple. As far as I see it, the only set-ups we’ve had were (1) when Apple had triple bottomed at $623; (2) when Apple formed a bullish engulfing candlestick at $610; (3) Last Friday’s close and (4) Yesterday’s close.

Those were the only really strong set-ups for a bottom. Considering how much Apple has come-off, I think this one has a very good chance of working out. Interestingly enough, when I started typing this update, Apple was flat while the future were down. Now the stock has sort of inched higher as we have gotten closer to the open. Remember, Apple could very well be opening below the lower b-band. The best case scenario for us today is to see Apple open below the lower b-band in the green, sell-off down to $530 a share to put in a test at the lows to make it official and then rebound all the way back to close slightly below the open. This would form a black bar hammer with a nice long wick under the lower b-band. That’s exactly how things bottom in May and on the exact same session. Meaning, when you look at May, we had that same two-day period. A huge sell-off followed by a black-bar session on Friday and a 6% up day on Monday.

Obviously, another good set-up here would be an immediately bullish engulfing candlestick. That would really get things rolling. I know it didn’t work well last time, but that set-up is pretty much one of the very best and most reliable out there. Whatever the case may be, if we do open and close below the lower b-band today, it will be a pretty solid sign for a bottom. We still haven’t seen that happen yet with Apple. With yesterday’s $12.00 close under the lower b-band, it’s quite possible that’s what we see today.

Remember, we want this to bottom as soon as possible so that we can track the recovery.

9:32 AM — by the way, I’m hearing all of this bullshit about how “Kass was right.” Screw that noise. Kass merely argued that Apple had peaked permanently. As in the stock’s long-term future was over. He never said anything about Apple having an immediate correction right now and anything about Apple collapsing down to $500 a share. Nothing of that sort. His argument was that Apple was done long-term.

So because Apple coincidentally corrects while he says this makes him right? WTF? Ok. So if I happen to make a general long-term argument that Apple is the best stock ever and the stock rebounds $100 points after saying this only to collapse down to $10.00 a share, I was right? What the hell kind of reasoning is that. Kass never made a claim that Apple was about undergo a huge correction. He merely argued that it had essentially peaked. If Apple is at even $800 or $900 a share next year or $1000 as we expect, how the hell does that make Kass right? Because he happened to make an argument that coincidentally happened at the time Apple corrected? Wow. That would be very easy to be right. Anytime I make any type of a long-term case for a stock, all I need to happen is the stock merely go up at any point in time and I’m immediately right.

Note that Kass has been perpetually bearish on Apple for years. So the minute the stock pulls back he’s immediately right on his long-term viewpoint? That’s a crock of horse shit. Sorry. It’s just extremely insulting to hear that.

Guess what everyone, I think the entire market is undervalued? So if the S&P 500 goes on a 50 point rally next week, then I’m right? What if it then falls 500-points after that?

10:03 AM — by the way, the selling in Apple has become so vertical that you can almost be certain in expecting a sharp v-recovery for at least part of the selling. I think this v-recovery could take Apple up to something like $620 within a 10-session period of time. See below. This is very very logical:

10:50 AM — today’s bounce is ok so far. Now we have to see if this is going to be one of those lift-off from the lows scenarios or re-test scenarios. Obviously, I’m sort of hoping for the former. Apple just need to do what it did last hour for the next 6-hours and we’ll be good. Up $70.00 would a good start. Ok. Maybe that’s too much. But how about up $30-$40? That’s not too much and after getting beaten down $170, a $40 up in one sessions shouldn’t be out of the realm of reason. Apple has no business sitting under $600 a share at all. So here’s to hoping today turns out to be something a lot larger. I mean this recovery is so tiny you can barely see it on the chart of crash:

A close at $570 would be nice. $580 would be even better. A re-test would also be ok. So long as we get to $580 on Monday.

11:15 AM — By the way, one of our subs may have gotten me a meeting with Jonathan Ive next week. He is a close friend of Ive’s and holds the $655 – $705 spread. Hopefully I can convince Ive to convince Cook to defend the company against these deceptive statements regarding supply. It’s clear from my discussions with others at Apple that these stories are largely deceiving. Apple is supply constrained relative to demand. But it has been able to and will produce the supply required to meet or beat most people’s expectations. Hence Tim Cook’s $52 billion revenue guidance. I’ll let you know how that goes.

11:40 AM — let me also say that I think it would be smart for you to keep spamming Apple investor relations and other contacts I listed for you a few days ago until they come out with a statement. It’s obvious that we put enough pressure on them to be thinking about it. Hell, they even started sending out a form e-mail. The more pressure they get from investors, they more likely it is for them to respond. And you do want them to come out and say, “hey look, the demand is off the charts, but when you look at expectations, we are very well positioned to deliver results that will meet or beat those expectations.” Even a re-affirmation of guidance in light of statements made by their partners. Apple needs to be absolutely clear on the supply issue. And if that means having to make a statement, then they have to make a statement. They shouldn’t just let the stock fall under such heavy attacks.

I would even go so far as to say that there was not even one other instance between 2009 and 2012 where Apple was under any obligation to say anything. Nothing was that bad where Apple needed to comment. But when it came to misrepresentations regarding subscription accounting, Apple did respond appropriately by offering adjusted earnings. Late perhaps, but it was an appropriate response.

I would say this is the second time where Apple should be making some sort of statement regarding supply constraints. And the statement should be clear that they feel confident of producing more than enough supply to meet or beat expectations, and that it is merely the stratospheric demand that is causing perceptions of supply constraints.

Again, let me remind everyone of the following. Suppose the demand on the quarter was for 100 million iPhone 5′s. Apple orders 80 million and suppliers are only able to deliver 60 million. In that state of affairs, Apple would be heavily supply constrained and Apple’s suppliers would be shipping far fewer iPhone 5′s than requested.

But that doesn’t mean that these numbers aren’t out of this world or dramatic. We have no idea what the demand side of the curve looks like. We just know that Tim Cook guided for $52 billion in a supply-driven quarter. Go back and look at what Tim Cook has done in supply-driven quarters. The last supply-driven quarter we had was Q2 2012 and Q1 2012. These past two quarters, were demand driven. Meaning, it wasn’t supply-chain managed.

Anyways. The point is this. If you spent the time to spam I.R. at least twice a week until they respond –both with phone calls and with e-mails — they will eventually come out with a statement. Or at least they would be aware of how pissed off a lot of investors are with their lack of response. As such, it will make it more likely that they will come up some sort of plan to alleviate concerns in one form or another. Feel free to disagree. It cant’ hurt. It can only help.

12:21 PM — in case you were wondering, Apple would need to close above $561 today to be considered a bullish engulfing candlestick. That would be a very good scenario. We’ll see if Apple has the energy to do that. But a $561 close would be the most positive thing to happen to happen in a very very long time.

2:15 PM — Well it’s looking like today has turned into a dud. This could be a small bounce ahead of a re-test of the $530 level next week. It feels like more pain to come. All Obama had to do is just look like he wants to play nice with others and Apple would probably be sitting at $558 to $561 right now. True story. Apple started tanking along with the rest of the market the moment Obama spoke. He could have at least just b.s.’d. It’s not as if he needs to worry about being elected for a third term. Well, let’s see how things unfold from here. We did explain why yesterday set things up for the best potential bottom out there and we do have this $10.00 rebound. The problem is, we need follow through. The good news is that despite this rebound, Apple’s Chaikin Oscillator is still sitting at 29 and the RSI is still near 30. So things are still very depressed even with this rebound.

On the bear side of the coin, Apple is forming an intra-day head & shoulders top which may suggest that we see further pain next week. I would like to remind you that it’s all about the quality of the rebound that matters. This is not a good quality rebound so far unfortunately. What you want to see is a huge $10.00 up, followed by a bullish pennant, followed by a $10.00 up, followed by a bull-flag, followed by a $32 up, followed by an “OMG THINGS ARE SO OVERBOUGHT” bullish pennant which leads to another $20.00 up despite being so overbought. That’s the quality rebound we want. Today is not it. Today is the false hope rebound:

The bulls might then argue that hopefully we close below the open today forming a black-bar doji. Then on Monday we get that up $30 followed by up $10 on Tuesday, up $10 on Wednesday and up $32 on Thursday which finally leads to up $20 on Friday. That’s what we want to see.

3:20 PM — The good news today is that in spite of the rebound, Apple’s Chaikin Oscillator is still at -30M and the RSI is still under 30. That’s very dramatic. That’s with today’s up $8.00 move. So that tells you that we’re still not even anywhere close from coming off oversold conditions.

4:00 PM — by the way, I never explained why Apple is trading like it is because I don’t think it really matters at this point. But don’t just presume anything. This sell-off was the result of increasingly negative sentiment finally leading to fear-inducing selling and even in some cases forced selling as a result of risk-limits being reached on the stock. In fact, I think much of the selling you saw between $580 down was forced selling.

Yet, this notion of Apple being supplied constrained is IN FACT just a false perception. It is not real. And that is VERY CLEAR from Apple’s guidance and conference call. It is ludicrous to think that any other of Apple’s products would be able to make up for the revenue shortfall. Apple guided for $52 billion in revenue.

To think that the iPhone 4S will be the biggest driver of that is INSANE. Not just misinformed. But literally INSANE. The iPhone 4S will never be able to account for this $52 billion revenue guidance number. We will get into this more later, but $52 billion revenue guidance implies that the iPhone 5 is not supply constrained relative to expectations. It is supply constrained relative to demand which is a totally different issue. Again, suppose expectations are for 50 million iPhones, but demand is 700 million iPhones, if Apple is only able to deliver 60 million, it would be heavily and outrageously supply constrained. It would only be able to deliver 1 iPhone for every 10 people that wanted one. But it also would be meeting expectations.

Going into the quarter, expectations for the iPhone 5 was around 50 million. Apple will exceed that number. So in the hell are we talking about exactly?

4:02 PM — so even with today’s rebound, Apple is still very much extremely oversold. Here is where things stand in our two huge indicators – the 14-day RSI and the Chaikin Oscillator. On the 14 RSI, we are still under 30. That’s extreme. On the Chaikin Oscillator, we are still at -30M. So that is good news. It’s good news because it means this rebound hasn’t gone anywhere close to far enough to even dent the oversold conditions and there is a lot more to come next week:

I think there is a fair chance we see follow through on Monday and that this could be the start of the rally. We will see on Monday. Good start to the weekend at least.

4:13 PM — take a look at this. Today’s action is a bull-flag on Apple. And it’s a big one too. I think it’s possible that Apple could be up $20.00 on Monday. We will see how this goes. But so far today was really positive overall. If Apple does in fact break to the upside, it wouldn’t be totally unreasonable to expect $570 to $572 at the close on Monday followed by another +20 on Tuesday. We could very very very easily end next week above $600 a share.

If Apple catches momentum, then we could end-up seeing a run to $650 within 4-weeks. If that happens, the $655 – $705 spread would rise to $20.00. Which is above our cost-basis and probably above most of people’s cost-basis here. What’s more, even if you bought at $25, you could take the 20% hit and move on to 2014 spreads at cheap prices which would be able to get us somewhere.

I do think a test of $650 by mid-December would get us completely out of this mess in every sense of the term. That’s a long time to get there and we have more than just a good shot. I think we have a great shot to get there.

1,198 Responses to Bullish Cross Live

  1. Daily Trade Alert – Alert:This Huge Stock is on Sale

    http://dailytradealert.com/2012/11/11/alert-this-huge-stock-is-on-sale/

  2. Just looking for steps in the right direction. We were at $580 last mon and Tuesday . Reclaiming that is a start.

  3. Links 11 Nov: Apple Settles With HTC. But Why?

    http://bullishcross.com/2012/11/bullish-cross-live-314/#comments

  4. Good to see some of the bears turning positive…the real question this week will be the quality of the rebound..how far and how soon? 600 this week , IF that happens, will be huge. When Apple bottomed on May 18 in 530 area, it traded below 600 all of May and June even after the +30 bounce on the mon after….so, that’s my concern and I think we will find out in a couple of weeks how this is shaping up…what a mess we are in:-(

    • Bulltrade,

      The text below is from adave. Seems well reasoned and I would certainly declare victory on January spreads in this range. We have to get above 575 in a hurry and then hopefully if we get there, we can get a retest of 590 (200 day). At that time, we should look to roll to some safe feb doubles and some core. A lot will depend on the fiscal cliff and overall market. Andy’s SPY analysis will be critical and so will fiscal cliff.

      Most importantly, we need to start respecting key technical levels and getting active. Not enough time left for the hope and prayer strategy we have been following, that ship sailed last week when we broke the 200 day. Lets just pray the may low around 530 holds.

      What to expect next: OK, back to the future. How high will we bounce? Not as high as many hope we will. This decline has been 7 straight down weeks. For anyone looking for a good bounce to exit longs, they have been left actionless. For anyone trying to buy on extreme oversold indicators, they have been continually disappointed. This kind of action takes a long time to repair itself. There will be a lot of people looking to exit positions, get some of their money back, get whole, or as close to whole as possible. AAPL rallies will be hit hard by sellers, like a game of whack-a-mole.

      Here are some metrics of what we can expect. Refer to my CPE Daily Chart to see the following levels. We should expect to go up a Fibonacci 0.382 of the decline. That would mean 599. We should expect to go up by a valuation of CPE 1.3. That’s the extent of the bounce off the May low. That would mean heading to CPE 13.4, which is at 596 a week from now. It’s not a coincidence that those two calculations agree with each other. So that should be the level that is most likely. It’s most likely that we reach the 590-605 area, and it’s most likely that we stop there as resistance. Somewhere in that general area should be what is expected. Can AAPL go higher? Sure. Is it likely? I don’t think so. At least not for the next few weeks. AAPL will trade in a valuation trading range in the lower part of the overall valuation range. Remember, we expect this to be a low valuation quarter. The move back to higher valuations in the valuation range will not begin in earnest until January. Until then we will likely consolidate with low valuations largely within the CPE 12.6 to 13.4 range for the rest of the year. That’s my expectation. That may be fine tuned once we see how quick the move off the lows is, and where the swing lows occur following the next swing high.

      • I have seen adave’s model – I asked the question earlier regarding the accuracy of that model in predicting tops over the past 4-6 quarters?

  5. Do you think the China Mobile deal and the very positive response to the IPad Mini were factored into Cook’s guidance in October?

    • Apple is supply constrained this quarter, so while a China Mobile deal would be good for the stock it means nothing for this quarter’s earnings. As for the iPad Mini, Apple will run its factories full tilt and, in the worst case, fill the channel should supply outrun demand. The result, I believe, would look the same at earnings. At least that’s how I see it.

      • Can we agree that the China Mobile deal, would keep the IPhone 5 sold out for 2013 and beyond? And they plan. To open 12 new stores, but only one in USA. And in the case of the Palo Alto store, it is twice as large. As the store they replaced accross the street. And the stores outside the USA will be over 40% next year. I do not know the details of square feet per store, but I think the new ones may be larger.

        • A China Mobile deal would certainly be positive for the stock in 2013. Going back to October guidance, I think that it was not by chance that the iPad Mini was released before earnings (you might recall that the announcement was, seemingly, delayed by a week) simply so Cook *could* give proper guidance.

          Personally, I don’t think Cook tries to sandbag, but this quarter he simply *had* to factor in potential hickcups into what investors could count on. Because of that, I think we have some room for an upside surprise.

        • ffabingo – I think a China Mobile deal would cause the iPhone 5 to be sold out, for sure.  But there is no China Mobile deal, is there?  The last I heard, CM’s infrastructure is not now optimized for the iP5 (little or no LTE/4G), so in the short term CM customers won’t account for a significant demand for iPhone 5′s. 

          I believe that CM’s smaller competitors are financing iPhones for their customers (i.e., providing subsidies), and that should help attract large numbers of subscribers away from CM.  If things play out like that, by the time CM’s infrastructure is upgraded (over the coming year), it will be that much more anxious to sign an Apple deal.

      • Was supply constrained.

  6. Interesting take on Facebook. Maybe this can be a good candidate for Andy/BC community next year.

    http://www.zenpenny.com/wp-content/uploads/2012/11/yhoo1.gif

  7. Back to Apple store in Valley Fair mall. No line, because no shipments on Sunday, but over 50 people in store, while Microsoft has TWO. I kid you not, and the Microsoft store is bigger

  8. So what are the panel’s thoughts on the S&P 500 this week? Does the 200 hold?

  9. Please check out my new strategy here. One of the nice things about it is, if the thesis was wrong at this point in time (Eg: OCT/NOV for JAN options) you’d still be able to get out with a profit.

    http://bullishcross.com/forums/showthread.php?165-Dragonfly-s-Strategy&p=1318&viewfull=1#post1318

    • Any chance u can post it here? Don’t have forum access…

      • Unfortunately, I can’t, it’s a multi-message strategy with discussion. Maybe it needs its own website?

    • Dragonfly,
      $95 EPS for 2014…I predict you wind up broke. Just hope your pipe dream doesn’t take down too many other subs with you.
      Averaging historical growth rates and extrapolating forward…give me a break…why do you really spend/waste your time on this BS? Apple market cap at $1.2 trillion, you are part of the problem, not the solution to good quality risk managed investing.
      Lottery tickets would be more fun with the same outcome, IMO!

      EBR

      • EBR,

        What are YOUR thoughts on 2013 EPS? ($56 ish?) I dont know how your forecast for 2012 compared with the 2012 actual. Can you share. I am a more conservative investor, and I think you are too.

        Regards

        • $52′s.
          Keep in mind we need $13.87 for the Dec Q just to STAY AT $44.15!
          Assuming a modest beat for the Dec Q, the Mar Q has a pretty strong comp to match from Mar 2012. Lets assume that we beat the Mar Q yr/yr by $2.00 and the Dec Q by $1.0, now we still need yr/yr increases for the third and fourth Qs totaling about $5.00 to get us to $52ish.
          Can Apple do better? Sure.
          But don’t forget that Q4 may see lower iPad and iPhone sales as we anticipate the Dec Q new releases. Also discounts on old models may hurt margins temporarily.
          Am I am willing to bet on a $60 TTM using already highly leveraged spreads, definitely not!
          $52 is the Fiscal 2013 TTM that is investible for me using option spreads.
          Can this change? Sure. What would cause me to increase my estimates? China Mobile mainly.
          Those thinking China Mobile happens in the Dec or Mar Qs don’t understand that there are still network compatibility issues, negotiating challenges and a major carrier subsidy obstacle. China Mobile’s policies are controlled by the Gov’t much like any state owned business. I’ve seen reports that the Chinese Govt isn’t going to quickly roll over and give in to Apple’s normal subsidies for a very rich Western enterprise.
          I am very much an Apple bull but I want to invest aggressively using option spreads vs gambling it all on ‘best case assumptions’. Apple ‘missed’ in several recent Qs, not their fault iMO. The fault lies with the same analysts that project $60-$65 TTM for Fiscal 2013.

          • This all makes sense.

            I am comfortable with 25%- 30% top like growth for apple

            Where I struggle is when it comes to gross margin and net income margins.

            Andy is at 45% which I don’t get. Seems too high. At least for next quarter given the 36% guidance.

            • Meaning, despite the bear case around competition, I take great comfort in the overall market growth. Gartner is projecting 50% smartphone growth this year to 1.2 bil. units.

              This is 50% growth. And smartphones are 50% of apple business and apple is gaining share.

              And tablet market is growing even faster so even if apple loses share, it will still grow top line at 25-40%

              This is just fabulous growth. The bull case is still strong

              I just don’t have the modeling skills to project gross margin and net income margin.

          • You can’t be bothered to even pay attention to what you’re attacking, and you tell me *I’m* going broke? My EPS is more conservative than Andy’s FWIW. Reality is, you are the problem– you’re incapable, or unwillng to think, and instead spout your mouth off with ignorant, contradictory nonsense, because someone said something that made you realize how insecure you are. Either actually read what I wrote, and make an intelligent response, or kindly STFU. The world has enough stupid, already, thanks.

          • Also, if you’re focusing on EPS projections, you’re being flat out dishonest. They are irrelevant to the strategy. You use the EPS projections you want. I’m not selling anyone on a particular view of EPS, and pretending like I am is simply dishonest.

            Just because you got yourself into hot water, don’t take it out on me. I’m the one offering you a way to avoid making such mistakes in the future.

      • EBR,

        This guy has a more balanced approach to growth.

        http://www.keezer.nl/applewatch/

        By the way, I are Andy’s eps estimates old? I believe he said they had not been updated.

        Is that your understanding?.

        • Doesn’t really matter to me because I am not comfortable with the old or the revised BC estimates. Its not why I like/use BC.

          • Either put up better estimates (which you haven’t done, having completely ignored the question) along with a rational, or admit you’re bashing me for not doing something that you can’t do.

        • Andy’s eps estimates were updated at the end of Oct and took into account the $44.16 number from after Oct ER. But they are still high relative to many others (e.g. EBR’s). The “AAPL to $1000 by Jan 2014″ projection is based on those high eps estimates, and a P/E of 15-16, which is also high, considering where we are now.

  10. How do mutual funds close their books for the year? Wouldn’t they need Apple at year highs or close to it? Last year it closed at 405 which was 20 points below the year’s high (5% lower)…that would be 670 this year…so, what I am wondering is how does the year end closure stack up against huge mountain of Jan OI…all that assuming a bottom is in and a rally starts in earnest tomorrow..btw, 670 is also approx 60% above 405 which is the EPS growth from last year Oct results, so there is some logic there

    • On macro Technology Seasonability:

      Exerts from Joe Terranova’s book “Buy High, Sell Higher”: (read this book)

      1. “Historically, technology tends to perform the best from about Labor Day to the beginning of December. That’s the appreciation period.” Why? See (2)

      2. Why? -> (a) “…weaker dollar…goods are more attractive to overseas buyers”, (b) “…consumer technology stocks make great holiday presents”, and (c) “…money managers who are underperforming the S&P 500 played catch-up [which can lead to melt-up rallies in technology]”

      3. Expect beginning of year weakness -> “There is vulnerability in the technology space that occurs at the beginning of the calendar year. That is when asset managers tend to sell off and cash in their technology winners. ”

      4. Bottom line: (i) Enter in August. (ii) Exit in April. (iii) Expect some weakness in Jan.

    • That’s encouraging, thanks for sharing this.

      • It is very encouraging. It also lines up with zepenny view. And makes sense since I think fiscal cliff worries settle down just enough for market to rise/trend sideways through thanksgiving. I don’t think anyone expects cliff to get solved in November. Market will give Congress some time to come together and solve. And Obama is going to Asia for a week so that might change headlines.

        My concerns are Europe and going down to fill that gap. Best case would be for SPY to fill gap at 136.7 and apple to diverge. Otherwise we are looking at 520 support level on apple.

        • Apple needs to diverge from broader mkt…has been selling for a while

          • Agreed. Apple led way down so now it can lead back up. You have to believe that a lot of that money that rotated out of tech into banks and energy and other romney stocks will now rotate back to tech. Google is at 200 day so that could catch some support. Goog and apple have been correlated so if goog catches a bid at 200 day, maybe apple will too. Goog’s earning miss really got the snowball going for apple on way down. It’s been a perfect storm.

  11. Nick Nansen’s new article
    http://nanseninvestments.com/

  12. Andy: one of th BC live threads talked about 20,40,60 day rallies from 200DMA touchdown…well, we are well below that level now…do you have any comments on the data referenced in this thread in the context of where we are now? For others, this is a good thread to read through…talks about Jan OI issue at length too…
    http://bullishcross.com/2012/10/bullish-cross-live-307/#more-19924

  13. Andy,
    I have immense respect for your in-depth analysis on AAPL, the market and your unprecedented commitment to help BC community. Would like to share some constructive thoughts to avoid such huge drawdowns in the model and potentially huge $$ loss for many following the model.
    1) More emphasis on risk management instead of maximum possible rewards. BC model being fully invested long embracing higher risk may have contributed to lack of risk management for some. While it is often said, one should never invest in spreads unless willing to accept total loss, proper risk management can almost guarantee there would never be a total loss.

    2) Always highlight the possibilities with highest probability. You provide so many outcomes in real-time (which you call as weather report) but it often clutters our mind. Fewer updates of higher quality may be beneficial as we are not required to act most of the times.

    3) Always remind us to not ignore risk management even when you are extremely confident of the most bullish arguments. This is very important as some of us had 30% or more cash on the sideline when AAPL was @700 but got into trouble by going all in following your recommendation to new members to buy around 675. Of course, it was a mistake as you had earlier said one should always keep 20% cash as insurance for black swan events.
    Wish to see your comments and looking forward to your guidance for recovery from the recent debacle

    • +1 lack of risk management has pretty much been the biggest issue…parabolic rally at the start of the year has messed everything up for us…instead of making money, we are at risk of losing base capital

  14. Manish Mallick

    +ve comments from both sides to address the fiscal cliff!!
    http://www.reuters.com/article/2012/11/11/us-usa-fiscal-idUSBRE8A80WV20121111

    • Dude – r u still gunning for 200 point rally by Jan expiration?:-) I say bring it on…hopefully, the bottom is in now…

    • Amen. I was expecting this. Lets hope we see many more positive articles like this tonite and this week and again next weekend after the meeting this coming Friday.

    • Actually one of the most encouraging thing I read this weekend was bill kristol walking back on some of the previous non-negotiables. That, as much as anything, feels like the beginning of a compromise strategy. I’m still cautious but here’s hoping.

  15. For all those posting positive articles supporting the point that AAPL is crazy oversold (which I agree with), I want to temper our hopes with my favorite Keynes quote: “Markets can remain irrational longer than you can remain solvent”, followed by my second favorite quote of his: “I should have drunk more champagne”

    Even so, I’m also really hoping for a good week. AAPL is irrationally oversold. I think most of whatever tax selling needed to take place has probably finished up (I hope), and now sound fundamentals and technicals can hopefully bring us back to a reasonable place. FWIW: I stopped into my local Apple Store today and it was really insanely packed.

  16. The fiscal cliff will be resolved before Dec 15th because
    1. Nobody wants it to happen
    2. Boehner is not saddled with as many tea party idiots, and is not an ideologue
    3. Obama does not want it to happen
    4. They go home for vacation about that time
    In summary the Kabuki dance will end by then

    • But even if you assume that, it’s hard not to imagine a lot of saber rattling before. Like it or not Obama’s best hand lies in convincing the republicans that be will go over the cliff. Since that is the strategy for the short term it’s hard to imagine any kind of market rally before hand, wouldn’t you say? Especially as one of the big unknowns is how they will negotiate the increased revenue.

      • That’s my fear. These jokers may have to look over the edge of the cliff before deciding not to go over.

        My understanding is the the billionaires who control the country have been working on a deal behind the scenes for some time.

  17. How much money would be generated by allowing the tech and drug companies who have a large amount of cash overseas be allowed to repatriate some of that cash for a special dividend this year? The federal and state governments would collect about 40% this year.
    In the case of Apple they would attract a new group of long term investors, and get rid of some HFTs

  18. Palo Alto store, 1:30 pm Sunday, Very busy, steady stream of people. zero minis in stock.
    Saw 3 MB pros leaving in the 20 minutes i was there.
    Seems a high level of excitement all around. (more than usual)
    I think there was a Kamaaina BC sub near the Ala Moana store (My favorite store), -can you post an update if you happend to be there this weekend.
    Cheers All! Its going to be Green Christmas!

    • A very very beautiful store. Great news. I visited the Valley fair store and when I showed the Apple sales guy that he could sell his IPad 1 on Amazon for $200. He thought that he will trade up. What happens to all the trade ins? Who buys them? Do they stay in the country?
      I admit that the Amazon offer is a trade credit as opposed to cash.

  19. Look at this chart…Apple spending a ton of time at lower B band much like last Nov…either this is setting up for a huge rally (another 50-70% like last Nov?) or we keep going down leading a broad market crash…I don’t think it means anything in between IMO given how extreme this sell off is…
    http://stockcharts.com/h-sc/ui?s=AAPL&p=D&b=5&g=0&id=p04647644571&a=272733618

  20. Steve Hanna (stockmusician)

    Don’t know if anyone has brought this up already… As of Friday, AAPL has just touched the top of the long term channel we were in from 2009 until we broke out of it this past February. Among all the other bottoming indicators, this could contest the “ultimate retest” of that previous trend, and a good place to bounce from.

    • Yea. There have bee a few charts.

      One shows a long term support line around Friday close.

      Another shows the one you are referring to where of we drop further we enter into the lower channel.

      And another shows support around 517.

      Hopefully Andy can reconcile all these channels and supper lines for us

  21. Really looking forward to the update. Again, hope it doesn’t come at midnight.

  22. QUESTION REGARDING CLOSING THE SHORT SIDE OF A VERTICAL CALL SPREAD…

    Let’s say on our Jan 655 / 705 spread we BCO @ $47 and SCO @ $27 for a Net Debit of $20. Also, let’s assume we bought 10 contracts, costing us a total of $20,000

    If on this pullback, we bought the short calls back at $5.00, costing us another $15,000 (i.e. $5.00 * 1,000 shares).

    Therefore, out total outlay is now $$35,000.

    Am I correct in assuming that the MAX amount one could lose on this Vertical Spread, that was then unwound, is now $35,000, not the original $20,000 laid out?

    I want to throw this out there so everyone whose asked questions about this can see this example. For those who are experienced, please chime in.

    Thanks.

    • 25000 not 35000 and YES, max loss is now 25,000.

      • Let say at $600 on Nov 20 at 32% volatility the 655 C will be worth 11.70 while today is worth 4.10 = +186%
        At the same volatility the 655-705 spread will appreciate from 2.55 to 6.85 = also +185%.

        The big difference will only be noted at much higher prices.

        • For the true believers another “strategy” is to buy the 650 calls for just a tad more than the 655′s would be. This pushes the gains on the short leg out to next year. If the stock springs back up then you can either sell a second set of covered calls on the 655′s or just close them out. Either course seems high risk to me.

    • $5 *1000 = $5,000. Not $15,000.

    • oneinfiniteloop

      Yes, max loss would be $35,000 if aapl closes under $655 on opex. I’m not sure how Molari is getting $25,000. Of course, now the max gain is unlimited rather than $30,000 from original spread.

    • Also remember that on the way up, if you’re looking to get out even, you have to add enough to cover the taxes on the realized gain (27-5=22K) that you locked in on the short. You can’t simply get out when the long hits 25.

  23. Goldman note out tonite. Any BC members have access to it?

    @markflowchatter: Goldman Sachs note out on $AAPL and HTC, net net +ve for both companies. One less piece of the litigation puzzle left out there for $AAPL

  24. Is there a December 1st date for the Judge in San Jose with Samsung? And is it important?

  25. Went to the Apple store in Boston this afternoon. Store was crowded but no availability for IPad Mini or IPhone 5. They ran out of their mini allotment Saturday afternoon. Also checked out the new Microsoft store which is in a busy mall across the street from Apple. That store was busy but much less square footage than Apple’s retail store. Microsoft store had at least 30 employees, all dressed like Apple employees. The surface is a nice product and I think will sell well during the holidays. My takeaway was how much money Apple is leaving on the table.

    • Apple needs both a larger, and smaller form factor variant, of the iPhone 5. Some want a small phone, with the ability to gain web access, while others want more of a web device, that also functions as a phone. The smaller “5″ could be presumably free, with a two year contract, and the larger “5″ could fetch a premium…say $250.00, with a 2 year contract. Not everyone is a techie! Why leave room for Samsung and ITC?

  26. Cobra says watch VIX and sox divergence. He says when SPX keeps moving low and VIX refused to move high, then bottom is close.

    http://stockcharts.com/public/1684859?vote=success

  27. I don’t think tax selling will be a problem. My understanding is that the wash rule does not apply to those making profit, so they can sell and buy right away.

    • Not good, but smells like bears are getting desperate

      • Shaun Abraham (renjixb)

        I hope aapl rises as we need a v recovery but if it drops there needs to be a plan this week on what to do…hopefully the report has more info detailing what to do on a drop. How long can we hold 520-530 when you can buy.a 700-800 jan14 spread right now for 10…as long as we have capital of 15 to 20% we can get back by jan14…that’s if you didn’t want to get a double on a short term low 500 spread for jan13

        Assuming EBR conservative TTM of 52 x 15 = 780
        Cash ratio 127.88 + 48 ($12b*4 qtrs) x 5 cash ratio = 870

  28. Wonder what’s taking Andy so long with the update….maybe it’s all of that proof reading he does. Haha.

    • I don’t know if there is much to say right now, everything depends on the quality of the rebound and whether the bottom is final..

    • To be honest, I wouldn’t be surprised if Andy is a bit bummed out by all the stupidity out in the market and the panicked tone here in the comment sections. I hope not, because I hope this seems like its a good set up for making some money.

  29. I think tomorrow may be the most important trading day of the year.

    • I’d bet Andy’s going to write “Tomorrow is key” in his weekly update. We haven’t heard that one in a while.