Apple Investors: Fasten Your Seatbelts, Put On Helmets

by: Zach Bass September 11, 2008 | about stocks: AAPL / AMZN / BIDU / GOOG / RIMM    

Zach Bass

About this author:
Become a Contributor Submit an Article
  • Font Size:
  • Print

What are the ingredients for a very sick market? Let’s start with the lesions on the surface, like a commodities bubble burst, total financials breakdown, anemic tech sector, and a housing fiasco. Now let’s combine that with the following deleterious symptoms like big volume on down days, gap ups finished off by black candles, and negative divergences in all the time frames. Then let’s delve a little deeper into the internals of the markets, such as a relatively sublime put-call ratio, a VIX with plenty of room to grow, new lows picking up, and declining issues eclipsing advancers.

Normally I would say that you have to look at market indicators with a contrarian eye. When things seem their worst, then a reversal can’t be far down the road. When sentiment is in the toilet it’s time to whip out the glade. But the problem here is that while momentum is pointing down, there’s no capitulation in site. The VIX as I mentioned has not even come close to peaking, in fact it declined a good portion of the day yesterday. And while the bull-bear spread is at 4 percent, the put-call ratio hasn’t even broken a sweat, sitting well below 1.0. What does this all mean? It means there’s no fear in the eyes of the Bear.

So why would I think Apple (AAPL) is so vulnerable? It’s a strong company, with incredible products, healthy sales, zero debt, etc. There’s no denying all these facts. But to the big money trader, none of that matters right now. What matters is that tech is weak, and AAPL is the de facto leader of tech and it can’t hold a bid. If AAPL goes down, what chance does the rest of tech have? Well, traders know they can bring AAPL down to do their bidding, and so they will. The other leaders of tech, like Google (GOOG), Baidu (BIDU), Amazon (AMZN) and RIM (RIMM) even more vulnerable. Bring down AAPL, then any of these other leaders will follow, then the rest will go down like dominoes.

All the bears need to do is bring the S&P south of 1200, and then everything will unravel. Well, AAPL is in the S&P 500, and tech is very prominent there as well. The other dynamic is that the S&P is energy heavy. Energy and energy services are weak as well. Oil is on the precipice of breaking into double digit territory. Yet another piece of the puzzle is financials. This past weekend we had a government seizure of the two biggest financial houses in the world, and the markets shook it off unimpressed. Now we have LEH about to bite the dust, maybe Wachovia right behind them.

Come on folks, let’s face reality. The market is going down, and there’s nothing we can do about it. Well, we could just face it. Then we have a choice, either step aside or ride this thing with reckless abandon. When will it happen? I don’t know, other than to say probably sooner than later.

Disclosure: Short AAPL.

Related Articles

This article has 89 comments:

  •  
    Sep 11 07:09 AM
    My biggest wish is that platforms like seeking alpha didn't exist so people like who, who has a specific agenda, couldn't spew your crap to make your point. let's face it baldy, when guys like you start stating the obvious and predicting what will happen next, my money is that you will be wrong almost always. go get a real job somewhere and stop trying to profit by hurting others. be American and go long. stop seeing the glass as half empty or, in your case, completely empty.
    Reply | Link to Comment
  •  
    Sep 11 07:19 AM
    Stop shorting Apple! This constant FUD, stock backdating nonsense and rumors about Steve Job's health (he's fine BTW) are nothing more than stock manipulation. Go troll elsewhere!
    Reply | Link to Comment
  •  
    Sep 11 07:19 AM
    You were pretty confident the market had hit "the bottom" I guess if you keep calling every new low the bottom you will eventually get it right ....
    Reply | Link to Comment
  •  
    Sep 11 08:05 AM
    Tech will move forward and prevail especially the leaders like Apple. Sorry, I'm going with reckless abandon as opposed to your doomsday alternative. The human race is going to push forward and that means tech moves forward unless you're betting on our sooner than later demise. Apple Bulls--Charge full speed ahead and run over these shorts. We'll just buy any opportunity dips.
    Reply | Link to Comment
  •  
    Sep 11 08:25 AM
    I am long AAPL. Yes, it concerns me to see APPL being pushed down. But what makes me sleep well at night is the fact that I know AAPL will exceed its previous high within the next year or two at the most. I can wait. Of course, my potential loss is not infinity, as is your. How are you sleeping lately, know AAPL can explode at the drop of a dime?
    Reply | Link to Comment
  •  
    Sep 11 08:31 AM
    I wouldn't use the VIX to suss out a bottom. I think the broader marjket will recover when we start seeing fewer bank failures and decreasing home inventory. That will be sometime in '09, if we get Obama; longer if we get war-monger McSame.

    As for Apple: if you need a laotop; you need a laptop and they are the ONLY company that has product worthy of owning. This makes them SOMEWHAT recession-resistant, assuming the economy doesn't sink from recession to Depression.
    Reply | Link to Comment
  •  
    Sep 11 08:35 AM
    If the economy is going as bad as you predict, money gonna crash too. World civil war is coming, and nothing can protect goods, people, gouvernement, country.

    Did you see the four Horsemen of the Apocalypse?

    Lol
    Reply | Link to Comment
  •  
    Sep 11 08:43 AM
    The moment you claim you are short apple stock you lost all credibility. Don't you think there is a conflict of interest in your posting?
    Yes market will crash and all, but this is where you buyAAPL not Short it. So do not try to manipulate it down so you get out of your short position. It is people like you that cause the markets to drop like this. No integrity, only selfishness. Why? Because you (and the Shorts) are betting on the demise of companies, the people working there and the big charity funds that own stocks. What could have been a 10% correction becomes a 50% or more drop because of people like you. Explain to me how shorting is fair. It is anti growth.
    Reply | Link to Comment
  •  
    Sep 11 08:46 AM
    Shorting makes just tendency going faster.
    Reply | Link to Comment
  •  
    Sep 11 08:54 AM
    why can't u just say ur shorting AAPL because it is a proxy to the markets?

    instead u try to justify ur short by wordy arguments and connecting unconnectable dots... and the icing on the crappy cake is this statement... "traders know they can bring AAPL down to do their bidding, and so they will."
    Reply | Link to Comment
  •  
    Sep 11 09:29 AM
    So Apple goes down. Congrats to the shorts, its a short term victory. But in Apple case its probably a short term dip and Apple is for sure a long term appreciation play as it goes down its iPod and MAC invation of the PC world, right? Yes. So if you like it at 150, then 140 or 130 is even better. so sell a cash collateralized Put (see link below), pocket the cash, then pick up the stock at the an effective lower cost than its current price later. If the shorts are wrong, you simply pocket the cash.

    www.cboe.com/Strategie...
    Reply | Link to Comment
  •  
    Sep 11 09:37 AM
    Good luck to you!!! Be sure and buy some protection, you will need it!!! If this is a trade between now and October 1st it is less than a 50/50 since they are at support - not a good trade!!! What do you think all those people in line at the Apple stores were doing besides buying an Iphone? They were looking at all the other stuff and picking up macs, etc... This is the easiest money out there today for a retail investor. If you want to research just drive to the closest Apple store and watch!!! I hope you are right and I can buy more Apple cheap before the next earnings report!!!
    Reply | Link to Comment
  •  
    Sep 11 09:40 AM
    The end of the world has obviously more drama value than the contrary...the fact is, its never the end of the world, except in the mind
    of those who need to create attention or have put themselves in end of the world situations.
    Reply | Link to Comment
  •  
    Sep 11 09:45 AM
    Well - sad as it may be - I think he is right.

    Right now the market sucks because the economy is is tanking due to 8 years of a brainless administration, 6 of those were combined with control of Congress, and the last two with virtual control.

    Now we are paying for the Iraq War Deficit and the brainless refusal to rein in the the mortgage feeding frenzy. DEFICIT - DEFICIT - DEFICIT!

    Does not look good folks.

    IMHO

    I am long Apple and wishing I had jumped 6 months ago.
    Reply | Link to Comment
  •  
    Sep 11 09:46 AM
    in august this horeses Bass said the stock would fly high when the traders returned from vacation --then he offered a SAFE PUT BULL SPREAD ---which also failed --now you tell me --who is this fraud
    Reply | Link to Comment
  •  
    Sep 11 09:51 AM
    @ firefox2

    You are right buddy - it is not the end of the world.

    But it is the beginning of the Great Republican Recession. And it is gonna be a doozie. I imagine that it will be 3 - 8 years to get out of this one.

    If you look at what he says, he is not doing any Apple bashing here. It is all external factors. And I am afraid he is right.
    Reply | Link to Comment
  •  
    Sep 11 09:58 AM
    I'm buying more. I like the lower price, especially as it gets down into the 140s.

    Chicken Littles thrive off of fear... "Republicans put us in recession! It's gonna get worse and worse! Yada yada yada!"
    Reply | Link to Comment
  •  
    Sep 11 10:49 AM
    I like it... they've exhausted the health issue, the stock options issue, the iPod growth is over issue, the MobileMe launch issue...

    ..so now they just say Apple's a great company with great prospects but who's stock is set to go down that will go down because... because because.

    Quite astonishing really.
    Reply | Link to Comment
  •  
    Sep 11 11:02 AM
    Sorry, if we get that unaccomplished do-nothing, Obama, we are in big trouble. McCain will be 10x better than a worthless socialist like Obama.
    Reply | Link to Comment
  •  
    Sep 11 11:39 AM
    @ reagan

    Socialist? LOL Where do you get this ridiculous stuff? Listening to the idiots Limbaugh and Savage? the ones who say Sadam Hussein sent the WMD to Iran? Come on! This is lunatic fringe stuff.

    Look - if you don't like his positions on something - fine, disagree. But this nwame calling just means you can avoid the issues. That is how the neo-cons (iread neo"con men") manipulate the people. Just yesll "Socialist!" or "Communist" and 25% of americans plug up their ears to anything else the guy is saying.

    Do you think the economy is better now than 8 years ago? Do you like the sky-rocketing national DEFICIT??
    Reply | Link to Comment
  •  
    Sep 11 11:54 AM
    ha. brilliant! when this clown shorts you know its time to buy.
    -I have to give him credit though for disclosing his short position
    Reply | Link to Comment
  •  
    Sep 11 12:24 PM
    "Do you think the economy is better now than 8 years ago? Do you like the sky-rocketing national DEFICIT??"

    People differ about politics. I happen to be of the Obama camp. But two things are clear: 1) the war has not paid for itself. Iraq supposedly has 79 billion in the bank and I DON'T see them at this time repaying us for all the money we sank into the war, right or wrong. I hope the next administration addresses this. 2) The regulators were ASLEEP to allow the bank/mortgage crisis to occur. I ASSUME that most of the said regulators were "Bushies" because he's been in office nearly 8 years.
    Reply | Link to Comment
  •  
    Sep 11 12:25 PM
    @Liam I have been short for the past few days. My positions are well in the black, and I expect there to be much more downside. You can see my daily calls on my blog: www.zacharybass.com
    Reply | Link to Comment
  •  
    Sep 11 01:26 PM
    All the things you take for granted with Apple are in danger. At that point $100 per share is even possible. Do I think the stock will get hammered that bad? No, but I'm not in AAPL and won't touch it till $140 and it appears more likely to go there by the day.

    The government has blown it's load. The market is going to go where it's going now unhindered by government intervention. It appears the direction is south. You can get mad or you can get real and sell.

    Just look at it as an opportunity to buy at lower prices. Apple is going to be at $300, it's just a matter of how long. Stop being afraid to miss out on it when it runs up. That's why people get so mad at shorts, their fear of losing out on gains keeps them married to a stock.

    Apple is not a good stock right now. It's just a fact.
    Reply | Link to Comment
  •  
    Sep 11 01:33 PM
    Obama will be right there w/that other lame ass democrat, Jimmy Carter, as one of the worst presidents ever if he's elected & thank God, its looking like America is waking up & not wanting this socialist running the country. jmmx, keep listening to idiots on Air America & keep your head in the sand like most liberals.
    Reply | Link to Comment
  •  
    Sep 11 02:07 PM
    Let's see your Apple calls (short, long) against some price charts. Do you have any credibility on calling this stock? Seems like less than a month ago you were calling for a rally....
    Reply | Link to Comment
  •  
    Sep 11 02:10 PM
    @ Reagan-yes, you're right...Jimmy Carter was a bad President, but unfortunately for your stated position, G.W. Bush has been even worse, and my guess is ( assuming you're old enough) you voted for him twice.

    We have hit the skids in this country partially due to extreme polarization of positions. Now, I just conceded a point to you-that Carter was a bad President. What point will you concede to me?
    Reply | Link to Comment
  •  
    Sep 11 02:32 PM
    @ Moderation- Bush has been bad in several ways but wonderful in others. I laugh when I hear whiny liberals calling him the worst ever when its not even close to what Carter left Reagan. At least Bush doesn't change his mind when the wind blows like Clinton did all the time. Its amusing when people call Clinton a good president when they can't mention a thing he will be remembered for......except for the blue dress of course. We will see how history judges Bush in 10-20 years. He could end up like Reagan who now is considered to be one of our top 10 presidents of all time.
    Reply | Link to Comment
  •  
    Sep 11 02:49 PM
    @ reagan

    I do not listen to Radio America. But I never called McCain any silly names.

    Like I said - As soon as this Savage guy yells "Socialist" you guys shut your ears, and refuse to listen to reason.

    Bush is the worst president in the history of the USA. Period.

    The invasion of Iraq is a disaster. A total disaster. It is costing this country about $1 Trillion before it is over. $1 Trillion!!

    Why is this country tanking?
    The DEFICIT The DEFICIT The DEFICIT !! (and I'm supposed to be the liberal???)

    You "conservatives&qu... like to complain about taxes - how come you are not complaining about giving away 10s of Billions of your tax dollars to Cheney's Halliburton and the other contractors? and billions more to bail out the banks?? Talking about Liberal give-aways!

    The war in Iraq is responsible for a major portion of the deficit. It is responsible for increasing the number of terrorists in the world, and it is responsible for the muslim world's GROWING distrust of the USA. Not to mention the deaths of probably over 100,000 Iraqi civilians and over 2 Million refugees, and 4000 American GIs.

    As Bush has bowed down before the alter of deregulation, he has totally abandoned common sense. His administration refused to heed warnings of the impending Mortgage meltdown. This is costing the tax-payers billions of dollars to bail out Fannie & Freddie even when the CEOs who ran it into the ground walk away with 24 Million dollars that eventually will come from the taxpayers.

    Do you think we are more secure when the American banks are bailed out by the Saudis, so that now they own a part of our financial system. Now Americans' banking fees and interest paid will be going to the people who DID support the 9/11 attacks. Is this a good thing?

    Is it a good thing that Americans no longer own our biggest brewing company?

    Is it in our national interest that we owe China billions (or is it now trillions) of dollars?

    Under the Bush-Republican administration the USA is rapidly becoming a third world country!

    Now YOU get YOUR head outa the sand!
    Reply | Link to Comment
  •  
    Sep 11 02:51 PM
    PS - I did not mean to say deaths of 2 M reffugees - only that there ARE 2 M refugees from Iraq.
    Reply | Link to Comment
  •  
    Sep 11 03:07 PM
    blah-blah-blah. Democrats approved this war so they are equally to blame. I can't stand Savage & would never listen to the boob. Its called free market capitalism. If you don't like it, leave. Obama will tax the hell out of the people who make this country run & then will give it all away on more government give aways like that boon doggle called healthcare. No thanks. Besides, we all know that democrats make this country less safe (i.e. Carter & Clinton) as they could careless about national security nor our military. There are not more terrorists out there nor do rational thinking Americans care what Muslims think of the US.
    If they're not careful, we will run right over their country next......
    Reply | Link to Comment
  •  
    Sep 11 03:25 PM
    You clearly are not a rational thinking american if you do not care what the muslim world thinks of the USA. THEY are the ones who fund the terrorists.

    Democrats did NOT approve the war. They were blackmailed into "standing united against Hussein's WMD" Bush assured the Dems that he would not invade Iraq unless absolutely necessary. But he lied and invaded anyway -which was his plan from before he was elected. He lied about the WMDs they never were there. The whole thing is one massive FAIURE - just like he FAILED to prepare for Hurricane Katrina (or is that that Clinton's fault too) - just as they FAILED to appropriately regulate the banking industry.

    This is the "not my fault" administration. Whatever goes wrong - blame Carter and Clinton.

    Gas prices too high? Don't blame the oil president - blame someone else. No WMDs? not MY fault! Not prepared for Katrina? not MY fault. Mortgage crisis?? not my fault. The problem with Bush is that he is to much a coward to take responsibility for his FAILURES. And damn it - they are his and the other stupid welfare-to-the-corpora... republicans!
    Reply | Link to Comment
  •  
    Sep 11 03:47 PM
    Gas prices are not his fault. Silly argument just like the stupid one about Cheney & Halliburton. no WMD's? Guess everybody else "lied" too.
    Yes, Katrina was horribly managed but past presidents down to Ford neglected to address the horrendous levee system. Mortgage crisis? Hardly his fault. Once again, failed arguments from a frustrated liberal.
    Probably upset because you realize that Obama isn't going to win the election. THANK GOD!!!!!!!

    Reply | Link to Comment
  •