JUST LETTING YOU KNOW
Apple reported their earnings. Earnings were flat, year over year – actually down on a number basis. Revenues were up 18%, a deceleration from quarters before.
The stock closed today at 450.50, down 63.51.
Being a huge believer in always protecting capital and knowing when maybe something is going wrong, it’s monumentally important to understand big market tops. It important to understand when major leaders top…and when a sector tops.
You never know what you’re going to get out of this.
So let me quote myself on several occasions going back into October 2012. I have no idea what Apple was going to do. I am just letting you know, that as of this second, “Apple is acting like every major top in every big leader that I have ever studied.” That’s been the quote.
Again, you never know what’s going to come. But you study precedent in the market.
You know how I tell you it’s unprecedented what the Fed and other Central Banks are doing with the printing of money? Well, in the case of Apple, THERE IS precedent. Every big leader and their major top, looks like Apple…except the ones that did major climatic runs.
So let’s go backwards.
You should be looking at a chart of this bad boy with a 50-day and a 200-day moving average.
In early-October, Apple broke the 50-day. Typically for us, the definition between an uptrend and “not” an uptrend is being above or below the 50-day moving average. Notice I didn’t say anything about a downtrend, if you’re below. Very often, you can get below the 50-day moving average, put in a new trading range and turn back up.
But something happened. Apple kept going lower and lower and lower. And the rallies were lasting a day or two.
That is the opposite of what Apple used to do.
And then something happened on November 2nd. Apple broke the 200-day moving average. This is a longer-term moving average and, for us, it defines bull and bear markets. And something happened there. It broke. The market was in a pretty good downtrend and that’s happened before. Apple has gone through its own bear markets during bear markets.
So into November, everything was a-ok because it was going down with the market and maybe it was just a correction and we’d be alright…though we kept saying to you at the time, “it is acting like every major top.”
Well then something happened.
It kept going lower and lower. Deeper and deeper…way below it’s 200-day moving average – not a good sign. And just remember, when you live below the 200-day moving average, nothing good can possibly happen with your stock.
But it rallied up. Why? Because on November 16, the market put in a bottom.
And for a few days, the stock rallied up violently because it had had such a huge drop.
But guess what happened? It failed miserably right at the conjoining 50- and 200-day moving averages.
And then it dropped badly again, even when the market started rallying.
And then at the beginning of this year, you had a good rally off the Fiscal Cliff. And, the 1st of the year, we had gap up – and what did Apple do? It rallied right into the declining 50-day moving average again and then immediately it began to sell off again. And what have I taught you throughout the years? Bear markets are made of stocks that top out, go down, and do a stair steps to the downside. And every rally is contained by the decline 50-day moving average.
And then we posed the question to you: What does the big money know?
This is not just Aunt Mary and Uncle Bob selling. This is the big money crowd that has owned the stock for years and who are now saying, “Hmm, there’s something going wrong.”
And what did I say to you? “We’ll know a lot more on the earnings report.”
Simple as that.
The stock was down 63.50…with the Dow up – meaning more Big Money selling.
And what’s happening? We’re now finding out that there’s a major slowdown going on in Apple vs. the way it was before. The news is that fact that they are kinda sorta in trouble versus the Android and other phones. As I posed the question to you, can they go from a iPhone 1 to 2 to 3 to 7…at what point to do people say, “Enough! We don’t need the iPhone 14.”
Of course, unless you put it over your head and it cures male pattern baldness.
So I’m just letting you know that Apple continues to go through that same process of every major top. I’m not saying this to scare you. I’m saying it as a fact. Studies have shown that major stocks have dropped, on average, 70% from the highs. To be more precise – 72%.
To be clear, I’m not saying Apple is dropping 72%. What I am saying is that if it follows form like other major tops in big leaders – you never know.
Just realize what then occurs. Even now, with the stock down from 705 to 450, institutions still own a ton of stock. And as it underperforms more and more, they want less of that stock. So they have to continue selling, leading to more pressure…
Now, I don’t know what can change this, except to say probably a new dynamic, unbelievable product.
That’s my take and that’s the story
Now what’s usually the next thing that happens once, there’s some wider recognition that that Apple could be in trouble?
I call it the downward bias drift. Mean – you get a lot of selling done and then you just start getting the slow drift to the downside as, slowly by surely, more and more people get out of it in order to find other places where they can put that money.
And that’s what it looks like here.
Again, I have no idea where this ends up. I just know it continues to act like every major top in big leader that I’ve seen in the past.
To give you an idea of what I do now with Apple…I get a picture of the chart and enlarge it and I put into my files for the future, just in case we see it again – and we will. Because just remember, all stocks have had a shelf life. The stock went from 15 to 700 since they announced the iPod.
And by the way, when the iPod came out, I said, “Man, this is nothing more than a Walkman!” Good one Gary.
Anyway, you get my point.
Typically, the next thing now, that’s stating to get recognizable is…you get the slow drift downward. But we’ll see.
So far, Apple continues to act that way. And the unfortunate thing is that it’s really affecting the Nasdaq-100 in the biggest of ways.
If you have a chance, get a 1-year chart of it and the Nasdaq-100. And go get a chart of the Midcap 400. Tell me what you think.
And keep in mind that Apple is still 17% to 18% of the Nasdaq-100. I have emailed them on several occasions that Apple too much of the index. They obviously haven’t listened. But I gather that eventually they’re going to have to make some sort of a change.
I’ve been talking to you about the cyclical areas. These are the areas that do best in the strongest of economies. And, for whatever reason for the past two months, they have really come to the fore.
As you know, most of the economic numbers we are reading are not very good. Some things are better. Employment’s better. And the numbers keep getting better. But they’re not great.
Housing is better. But still, Housing prices in many areas are 40% below the highs.
Things are better. But the worry is that it’s on steroids. You know – the 0% interest rates and the printing of a few trillion dollars by all the Central Banks around the globe.
If we didn’t have this massive printing of money and 0% rates, guess what I’d be telling you right now: Oh, ladies and gentlemen, about 3 to 6 months from now, we’re going to get some strong economic numbers.
Because markets are very good at forecasting it.
But let me tell you what jumping out now in a huge way: The Truckers!
Recently, I’ve told you about the airlines and the “stuff” areas.
Go look at a chart of Federal Express (FDX). It broke out seven days ago out of a long range. They’re earnings aren’t good. They came in -11%.
UPS? They were down 3%!
But look at JB Hunt (JBHT) today. It had a little breakout a couple weeks ago, but really didn’t move. But today, it’s up like 6% to 7% on huge volume.
And look at the rest of the group. It was a very good day.
So I’m letting you know that, under normal circumstances, I would tell you it is a “lock” that the economy’s getting better. But I have to think, what about all this printing of money and 0% rates and what if they have to back that? I don’t know.
By the way, Swift Transportation (SWFT) – big gap up today on very heavy volume, on their earnings.
I can list more.
Look, there’s nothing I like about the economic policies going on right now. But you do know, as I always tell you, I don’t believe in them – I believe you in YOU and our OUR hard work. And they do nothing but block us.
When I’m looking at the rails and what they’re doing right now – that could be really good news!
When see UPS and Fedex – that could be good news.
These are the companies that move things. And if things are moving, that means business is picking up.
So I’m keeping my fingers crossed. So let me be clear. If things pick up, hiring picks up. If hiring picks up, spending picks up. If hiring picks up, less people are getting payments from the government. If less people are getting payments from the government, deficits can come down.
And then you get into a virtuous cycle.
That’s how it works.
But then again, is this just money printing? That’s the question.
I don’t know. But I’m going try and give the economy, the benefit of the doubt.
And we’ll see how it plays out.
6-7 pm EST
Best of Investor’s Edge
Saturdays 1-2 am EST
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.