Monday, September 19, 2011

Apple's New All Time High, and What It May Mean for Bears

There's been no material change in the counts since the weekend update, so I decided to investigate and write about something else...

Some of you may have noticed that Apple made a new ATH today.  I was curious if this development should challenge my belief that we are starting a new bear market -- so I went back and looked at some charts.  

In 2007, the SPX made its ATH in early October, however Apple still went on to make a new ATH in late December -- two and a half months after the bear market had already started in the broad indices.

The other thing I discovered is that Apple is tracing out a completely different wave count (see chart) than the SPX -- or any of the major averages for that matter.  Apple appears to be in the process of completing a 3rd wave up, which likely means that it will hold up considerably better than the SPX, etc., during the coming declines.  While the SPX is in (I believe) a fourth wave down of Supercycle degree, Apple appears to still be in the process of completing a third wave up at Primary degree.  Thus, when Apple starts its bear market (likely soon) it should be correcting in a Primary fourth down.

What this means, price wise, is that Apple should not fall below its Primary first wave high of 202.96.  It could theoretically still take a 50% haircut from here, although that's drastic for a fourth wave down.  It would be more likely for it to take aim at the bottom of the gray trend channel.  It should ultimately make a three-wave move down toward the 250-280 range.  This is still a healthy adjustment, but not at all what I anticipate for the SPX.

It also means that after the bear is over, Apple should then go on to make even higher highs in a Primary fifth wave up... in other words, when the big bear market bottom looks near, going long Apple will probably be a great play.  

Anyway, here's the long-term count for Apple, followed by the analog charts (2007 on the left, 2011 on the right; SPX on top):


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