Thursday, November 11, 2010

Another Look At Apple’s Bubblicious Stock, Key Fibonacci Levels And The ‘Theory Of Middle Sections’ And ‘Mirror Image’ Pattern Completions.

We were the first to write of aspirational consumer stocks (luxury or near luxury brands) putting in major peaks four years ago.  Obviously this is a manifestation of people realizing the value of money.  Which they clearly did not at that time.  But they clearly do now. Yet this has not impacted Apple’s stock.  Yet.  It will when the manipulation fails.  And manipulation always fails.  

Apple's stock might literally be the largest remaining financial market bubble courtesy of the bubble-blowing Wall Street mobsters.  Well, other than Wall Street itself which is the largest bubble in the history of mankind.  Parabolic moves often develop a mind of their own until they eventually implode so picking the absolute top is not easy but it is not impossible.  It’s usually esoteric and often quirky projection methods which give us some indication of ultimate price peaks.  We wrote that commodities, the Russian equity market and the Shanghai market were melting up into a peak before an anticipated collapse a few years ago and we came pretty close to nailing the ultimate top and subsequent collapse.   And then there are times when the gods give us gifts for our analysis.   I am beginning to wonder if Apple’s stock is currently presenting one such gift. 

It's quite easy for the financial crooks to convince  society of the Apple pump because the company has been hitting on all cylinders for quite a few years.  Yet the dynamic of Apple’s business results is simply reflective of a banking system run amok that will issue dead people endless credit cards and new homes., ie Unsustainable consumption.  At some point, we’ll be playing musical chairs with the stock and there aren’t going to be enough seats for all of those holding the bag.   ie, Unsustainable equity market consumption.  That includes a lot of hedge funds and banksters.

Mind you, Apple's products are primarily focused on the consumer space and that is a very, very hard act to continue over a long term. First, because of the competition in this space from fast followers and game changers (something we wrote about years ago in regards to Apple) but second, and primarily, when any economy shows substantial weakness, consumer products will be the first to get butchered.  This is not an opinion but a fact of how capital flows through recessionary and depressionary environments.  And a change in discretionary consumer behavior of a few percentage points across a country or a global economy can impact many company revenue streams by 50% or more.  As we have written since well before the 2008 crisis, our downside target on Apple is below $40 a share or approximately a 90% drop from here.   Will we get there?  We shall see but blowing the bubble even higher does not change our downside target.  It just makes Apple’s stock that much bigger of a pig.  That much more manipulated.   For any dubious minds, don’t forget the supposed brilliance of companies like Sun Microsystems and Cisco which were seemingly invincible a decade ago yet fell 95% in Wall Street’s criminal internet scam.   These too were pumped by the financial bozos like Jim Cramer and CNBC’s endless array of “experts” and guests.

Remember this courtesy of Paul Farrell?  September 2000: Jim Cramer, Mad Money host. "SUNW probably has the best near-term outlook of any company I know." (Fact: Within four months Sun Microsystems dropped from $60 to $30. Down to $10 in a year. Below $3 in two years.)

Anyway, there are many brilliant minds who, over the last one hundred years, have applied their creativity to theories surrounding the price fluctuations of financial markets.  Many analyses involve patterns.  Most of the pattern gurus are artistic or mathematically-inclined regardless of whether they have any formal education in either.  (How much genius exists in the world today that goes unrecognized because of corruption or being denied a self-determined life in a stable society?  In the U.S., crooks get endless access to democracy’s capital while millions, representing massive amounts of untapped creativity and industriousness, are denied that fundamental democratic right.)

Repeated patterns of the universe are all around us.  They are a part of our every day existence.   Yet humanity and science have often extracted itself from the patterns, energy and metaphysical forces of the universe.  But regardless of our own delusions, humanity is not the painter but is in fact part of the painting.   Or as we have cited countless times, volatility of the natural world around us is but one manifestation of the same forces driving economic volatility in he world today. 

It has been many years since we mentioned George Lindsay on here.   In fact,  back in 2006, we used his pattern of three peaks and a domed house to nail the bull market top in the banking index within literally just a few points although we were many months too early on the time component.   ie, Our pattern analysis needed to shift to the right one peak.  A continual problem with interpretive and esoteric analysis.  In hindsight I attribute my time analysis error to globalization dynamics.

Lindsay was one of those brilliant minds to theorize new ideas surrounding financial market movements. Lindsay, like most others, had no formal financial training or education and that was to his benefit.  Put another way, education, as Einstein stated, often clutters the mind with senseless dogma and ideology – a major reason why human ingenuity and creativity often peaks at a young age – we start to believe all of the lies our mind feeds us about what is possible, all reinforced by the endless false beliefs of the people around us.   It’s the same reason why the status quo doesn’t see the train of change coming down the tracks. 

George Lindsay's most famous methods of analysis were his concepts of the middle section and mirror images.  I’m going to twist some of his work into patterns which I see consistently.  Sort of a Lindsay-ish analysis.  We'll keep it simple on here without going into excruciating details of these topics. Mostly because I think the patterns and concepts have merit but some of his detailed work is a little too quirky and arbitrarily interpretive from my perspective.  Generally, if we look at these two pattern analyses, what we see is a symmetry or a rising market with a period of price chop (middle section) in the middle.  The moves preceding and following the price chop should be of relatively equal time and price distance.

Below we show two patterns within Apple’s stock which fit this profile.  First is the overall larger move off of the price collapse back in 2008.  This is highlighted with the red middle section box and two relatively equal moves preceding and following the middle section highlighted by the red arrows.  The second is a similar “micro” pattern or pattern contained within the larger pattern.   In other words, it is contained within the second completion leg of the larger pattern and is highlighted in blue.

The second leg of the move highlighted in blue has actually run a small amount further than the pattern would suggest.  And that could be why price fell nearly ten percent in a single day upon doing so.  (Just days after we said Apple reached a 161% Fibonacci retracement level some weeks ago and that that level would provide significant resistance, Apple’s stock was hammered for a large single day drop.)  In other words, Apple’s stock was more than likely propelled beyond a sustainable price and hence fell precipitously.  It has since recovered to close a price gap on the chart but had a difficult day again on Tuesday.

Finally, this pattern should come to an exhaustion point just about now if we compare the length of time the market declined from its 2007 peak with the amount of time this rally has been in place.  ie, Using Lindsay’s theory of time symmetry.   The net-net is that the air up there is getting very thin and this pattern is almost certainly complete or completing literally as I type.  That is, unless the pattern morphs into something else.  Which obviously with such an esoteric analysis, is possible. 

Apple stock is the poster child for modern day stock pools, hedge fund manipulation and a corrupt financial system.  That it has reached and been repelled by very strong Fibonacci levels and is now showing a substantial increase in volatility while at the same time completing George Lindsay’s favorite patterns is of substantial interest to me.  Additionally, this is occurring at the same time that the S&P is completing a similar pattern at around 1225-45-ish.  

This all is happening as the S&P has been unable to breach the April-May 2010 highs.  Have global financial assets been blowing off the last few weeks as one final move before collapse?   In addition to the S&P, the banking stocks aren’t sharing such a similarly rosy view of reality.  And with our economy requiring greater and greater financial extortion to maintain itself and the profit bubble, I’m obviously very concerned.  Additionally, the institution of capital controls, the potential end of China’s massive stimulus package and the re-emergence of crises in Europe are all happening simultaneously.    This at the time when many illiquid aka able-to-be-manipulated commodities are making a typical blow off parabolic run just like we saw before their last collapse a few years ago.  And just like back then, we hear the same expected histrionics of hyperinflation and too much liquidity for markets to tank as we heard back then.  Something we noted a handful of days ago in our repost of the Top 41 Untruths.   In other words, “reform” has changed nothing, so we are simply seeing Wall Street repeating the same histrionic behavior with the same financial market patterns developing.

Obviously pattern recognition is an art and it is not always a reliable analysis, but in this case, I have a reasonably high confidence level that many factors are aligning to support this particular pattern. 

Before the world comes to an end, I’ll share a similar pattern whose implications are beyond horrific if the pattern works itself out as expected.

2010-10-18_1904

posted by TimingLogic at 9:19 AM

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