Ian Woodward's Investing Blog

Apple…the Canary in the Coal Mine?

Mail Bag:  Ray says  “AAPL is losing its lustre.  I think we need to find a new canary”


Ray:  You make a good point, and that is an easy call.  It’s right under our nose… NFLX; ERG of 286, 4th from the top on ERG, mighty strong, EPS Rank,  Rel Strength and Group Strength.

But that is not the purpose of the exercise.   The purpose of the JIRM Index was first to catch the early weakness, then to know whether the leaders were giving up the ghost and finally to know when the Market is DEAD.  However, I say don’t switch horses in mid-stream.  If this market is to go “DEAD”, AAPL will keel over long before NFLX…you mark my words, and I will certainly eat crow if I am wrong. 

By all means have two canaries…I can go along with that.  The purpose of selecting the key Canary was to smell the poison early, but with a strong stock that had Halo.  At the time, AAPL had the Halo, but subsequently it added to that Halo by announcing Stalwart Earnings. The poison of the market has now demonstrated several things:

1.  They are hammering Technology which was fat with profits of which AAPL was the surrogate
2.  They are ignoring the Great News on AAPL of a few days ago which announced 2 Million units of its latest product
3.  They are ignoring the latest news made just yesterday from our man Steve Jobs of its next product

Those three points speak volumes as to the major bias right now…downwards.  Therefore, with the added burden that the Market Indexes have now all registered an Intermediate Correction, I don’t have to tell you that we are decidedly at “Custer’s Last Stand” given the testing of the double bottoms on all the major Indexes today as Ron pointed out, and that AAPL is truly losing its lustre.  If it dies, so goes the market.  Of course there are always pockets of opportunity on the upside, but in the bigger picture, we will then be faced with the next question “What is The Road to Recovery?”  Very few Recoveries occur without Technology and Financial’s leading the way.  Retail helps, but not without the others.

From the work I have done it is now even more critical that we need not one, but two, Eurekas in succession and they must be accompanied by two Upside Kahunas.  “Why?”  Because no Intermediate Correction has recovered unless the %B was above the Middle Band and preferably at 0.6, and at this stage of the Game %B for the Composite of the ten Indexes we follow is only at 0.19.  I am not for one moment suggesting that given such a solid bounce we will be out of the woods, but at least we will have some cushion before a further collapse…should that occur:

         Canary AAPL

Best Regards, Ian.

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