WHY AAPL JUST HAD ITS MOST SIGNIFICANT WEEK SINCE APRIL 2012
First, a history of the price target that was just hit on the dot for AAPL: - On January 23rd this chart was posted showing the next logical area for support as being the generational trajectory from the 1987 high for AAPL. The price target this trajectory pointed to was 400-420. - As AAPL got closer to the trajectory through a routine of steadily dripping lower, on March 4th this chart was posted bringing greater clarity to the ultimate downside target revealing 390 as being the destination for any sustained attempt at a bounce. The low on April 19th was 385.10. Last weekend I posted an article titled, "AAPL: Downside Price Target Achieved, Now What?" In the article I discussed one of the expected results of hitting an extremely important level of support is high volume. While we didn't get that volume surge last week, this week we certainly did. In fact, it was the biggest weekly volume surge in AAPL shares since April of 2012. This is important not simply because volume finally decided to show up in AAPL, but WHERE that volume showed up gives away a ton of information. Here is a detailed look at AAPL on a weekly...
RANDOM THOUGHTS OF A PROLIFIC NATURE
- Considering emotion vs. process and execution. There are so many way to muddle up an otherwise simple equation to success not just in the markets but in life. Emotions will always be a part of our makeup. What we can do as progressive individuals is identify and isolate emotions for what they are. This will help in not allowing emotions to interfere with process and execution. In fact, it is imperative to process and execution that emotion remain as isolated as possible. Think about the times when process and execution take a backseat to emotion. The excuse always starts with "I don't feel like," which immediately tells you that emotions are hindering the process and execution that you know will create your success. This goes for anything you are motivated to do with a positive, beneficial outcome in mind. Outcomes that bear tremendous fruit never come without the sacrifice of isolating emotion while religiously following the creed of process and execution. Generally, individuals are never able to overcome emotions in order to allow process and execution to thrive. The very nature of process is repetitive, robotic and emotionless. The antithesis of human nature, which is filled with countless emotional dynamics. The ability to execute consistently also requires the ability to put aside emotional dynamics that are at the very essence of our being. - The pessimism that had come into the markets as demonstrated by the put/call study I posted last week is in the process of being relieved. Given the technical structure of the market at the end of last week, along with the quick return of pessimism, this current rally should not have come as a surprise to anyone. - There is a great deal of risk in the markets during May. The old adage "sell in May and go away," may prove true in 2013. I will be outlining this in greater detail over the next week or two. - The fact that the current rally is led by Consumer Staples, Utilities, Industrials and Healthcare smells of a rally that has global institutional asset allocation to the United States written all over it. When foreign institutions are in the initial phases of comfort with a particular investment theme, they appreciate familiarity, history and stability. The aforementioned sectors offer those attributes. This attitude of US assets being the least of all investment evils worldwide should continue to be recurring theme for the long-term. As comfort levels increase so will exposure to more aggressive names in technology, biotech etc. - The SOX is far and away the most bearish looking of all the indices I track. It...
CINEDIGM: ENTERTAINMENT WITH CATALYSTS GALORE
Position taken in the 1.40 range during the weeks of April 15th and April 22nd What Does CIDM Do? Cinedigm Digital Cinema Corp. operates as a digital cinema services, software, and content marketing and distributing company primarily in the United States. The company offers technology solutions, financial advice and guidance, and software services to content owners and distributors, and movie exhibitors. It engages in the ownership and licensing of digital systems to theatrical exhibitors; and provides monitoring, billing, collection, verification, and other management services to the companys Phase I Deployment and Phase II Deployment, as well as to exhibitors, who purchase their own equipment. The company also develops and licenses software to the theatrical distribution and exhibition industries; and provides applications service provider service, and software enhancements and consulting services. In addition, it acquires, distributes, and provides marketing for the programs of alternative content and feature films to movie exhibitors. The company was formerly known as Access Integrated Technologies, Inc. and changed its name to Cinedigm Digital Cinema Corp. in October 2009. Cinedigm Digital Cinema Corp. was founded in 2000 and is based in Los Angeles, California. The Conclusion Deserves To Be Mentioned First In CIDM an opportunity exists to invest in a company that has multiple fee-based, recurring revenue streams at a price that should have a ribbon around it, with purple wrapping paper and a pretty card. The kicker here is the fact that management has been proactive in restructuring the company in two separate ways that I will elaborate on later in this report: 1. CIDM has gone from a cinema services company utilizing a dilapidated business model with a steadily decreasing level of relevance to a full on digital distribution and cinema software services company 2. The balance sheet has been streamlined to the point that any risk posed from debt has been all but eliminated All the meanwhile, as is so often the case in small-cap land, the markets are treating CIDM as if it is the same company that it was in 2009. In fact, if you are to listen to the voice of the markets, it would seem that the old CIDM was a better company than the new CIDM. The high in 2009 was 1.72. The high for the stock in 2010 was 3.24. The high for the stock in 2011 was 2.60. In 2012 the high for the stock was 2.20. CIDM currently trades in the 1.40 range despite the fact that the company is vastly improved and radically different than it was in 2009, 2010, 2011 and even 2012. Let's take a look at what has changed. Management During...
4 CHARTS TELLING THE STORY OF A CORRECTION THAT IS ALL BUT COMPLETE
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AAPL: DOWNSIDE PRICE TARGET ACHIEVED, NOW WHAT?
In January, I put together a technical piece regarding potential downside targets in AAPL. The first downside target mentioned was based on the trajectory dating all the way to 1987, right before the crash. The downside target determined by this trajectory was 400-420 on AAPL over the short to intermediate term. click chart to enlarge Now that we are in the intermediate term we can see that the downside target on AAPL has been achieved, with a somewhat anti-climactic response. Keep in mind, not only was a key trajectory penetrated to the downside this past week, but a key round number (400) was also broken. If you would have asked me two weeks ago what kind of response I would have expected to such an event, I would have guessed the following: 1. High volume for the week 2. Price fluctuations that are more expansive than usual AAPL saw neither of those things happen this week, despite the fact it melted right through its trajectory and broke through 400. It was as if the stock broke 427.25. Nothing but crickets chirping, with the occasional streamer going off in the background. Here is a look at both the current daily and weekly charts to gauge what investors can expect from AAPL now that it is sporting a 3-handle: click chart to...
WHAT IS THE REAL STORY WITH MARKET SENTIMENT AT THIS JUNCTURE?
Measuring sentiment on Wall Street is perhaps the most subjective of all the analytic arts that is practiced on a day to day basis. It is one of the many tools out there that doesn't work until it does. Those who swear by it will be quick to point to the instances when it does as justification for future speculative positions that have no better chance of being correct than using a coin to determine whether to be long or short. Sentiment alone should not be used as the foundation for an investment thesis. You can always tell those who are inexperienced in dealing with sentiment by the level of importance they put on its readings. Those who base an entire investment thesis solely on sentiment are, in nearly every case, using sentiment as a psychological crutch to validate their prevailing bias. The truth about sentiment is that it will tell you whatever you want it to tell you at any given moment. Which is exactly why I choose to ignore sentiment measures, except when considered on the periphery of a strategy that takes into consideration numerous other factors first. During the end of March, I posted analysis showing how to use the put/call ratio (the only sentiment measure I look at consistently) to measure the point at which 5% corrections occur within the context of a bull market. This study solidified my belief that the chances of a 5% correction seeing its beginnings in April were slim to none. May looked like a better time frame to consider for such an event. Now is a good time to look at another measure of the put/call ratio. This time I want to look at a shorter-term measure of both the combined put/call ratio and the equity put/call ratio. The charts below are the 2 and 5 days moving averages for both of these put/calls. I use moving averages only to smooth out the results: click chart to enlarge As the charts above demonstrate, bears remain overly-anxious to regain their sanity through the creation of capital via put buying. Not necessarily what you want to see if you are hopefully bearish on the markets in the months ahead. This type of overzealous bearish investment behavior should not be occurring after such a powerful rally that has propelled the Dow and S&P 500 to all time highs. This leads me to believe that once this option expiration week passes, the markets should regain their footing for the remainder of April. I will reassess the sentiment picture again in...
LEAN BACK
Given my particular brand of market philosophy, exuberant bull markets (price, not sentiment wise) do not necessarily present a whole lot of opportunity. My best research and subsequent opportunity will come from more tame situations or even bear markets, where hopefully I will be wise enough to remain in cash long enough to have opportunities fall into my lap. There just isn't very much out there in terms of risk/reward opportunities where the risk is so well defined that I can put on a concentrated position that will make a real difference. Of course, I still have the tried and true portfolio holdings, some of which I have been involved with for nearly a year now. Even with these names, however, it is at a point where my performance thus far in 2013 doesn't warrant maintaining large positions. I am a staunch believer in portfolio performance dictating allocation. Growth in the portfolio determines growth in chutzpah. Deterioration in a portfolio demands deterioration in chutzpah. Swinging for the fences during a drawdown is the surest way possible of guaranteeing your eventual demise as an investor. The market will eventually get you if you don't check yourself. So I find myself in this weird place of not having new opportunities that are worth pursuing in small-cap land due to risk/reward being completely skewed towards risk. As well as a portfolio that is doing some reverting to the mean following the tremendous gains of 2012. With that said, my cash position now stands at 50% up from 40% reported in the last "Portfolio Update" on April 6th. All current holdings are small to mid-sized. Again, performance doesn't warrant taking on large positions at this juncture. With respect to the general market, I did say in the weekly review that a break of Friday's low on the Nasdaq had bearish consequences for the remainder of this week. I stand by that. Meaning that the recovery rally today will likely be sold for the remainder of this week. It will be much easier to assess the position to take into the end of April once this week is in the books. Back to twiddling my thumbs in anticipation of a time when they can be used for putting the cash in the portfolios back to work. Sitting tight....
5 CHARTS THAT WILL CURE YOUR NAPOLEONIC COMPLEX DURING THE WEEK AHEAD
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THE NEED FOR SIMPLICITY THAT WALL STREET WILL NEVER EMBRACE
Within the context of a bull market that voraciously searches for reasons to tack on points to the upside, the default stance of an astute investor should be that of simplicity. Attempting to dissect and digest an abundance of information will do little to justify the persistence of such a market. It only serves to cloud the reasoning of an investor. It is true that often times investors suffer from paralysis through analysis. Information is good to a certain extent. Within the investment community there are very few that escape being information gluttons. It stands to reason then that it is best to keep analysis extraordinarily simple. The greater the extent of the bull, the more simple one must keep their analysis in order to avoid being paralyzed through thought. This market is at a point where the more elementary the analysis, the higher percentage your success rate will be. This phenomenon of simplicity being the modus operandi of true bull markets is the reason you see so many newcomers do extraordinarily well during extended bull runs. Their approach is extraordinarily simple, falling right in the sweet spot of analysis that creates the greatest profit during these types of runs. I am not speaking about longevity here. It is true that those who create extraordinary gains during true bull runs will end up falling flat over the long-term. I am not arguing that point. My sole concern is creating the proper mindset for investors to perform in the here and now. We'll deal with tomorrow...tomorrow. Let's look at two charts that exhibit simplicity to the Nth degree. Without giving much thought in terms of dissecting these price moves, simply look at the essence of what is happening. Allow your eyes to do the work without any "buts" or "ifs" involved. The first chart is the Nasdaq Composite, which was most recently reviewed in the weekly review on Sunday. Here is the outlook after today's move: Next we have the S&P 500, which is putting together picture perfect movement ABOVE its generational trajectory. This is as bullish an intermediate to long-term pattern as can be imagined: You know why Wall Street is filled with underperforming asset managers that have destroyed public perception of aptitude within the industry? The very pedigree that defines the modern day Wall Street employee is the biggest impediment to success. The pedigree that defines asset management in the 21st century is built on analysis to the point of exhaustion. If you are not analyzing a stock, commodity or economy on an hour by hour, minute by minute basis then you are not properly fulfilling your duties. Or so they are...