Oct 222012

Apple dropped below 623.55 on Friday and that marked a 5 wave decline on a small degree. We know that when a market declines in 5 waves it normally happens to be a  part of a bigger move.

AAPL - 60mins chart, Data and Chart Courtesy Bloomberg

With that in mind, let us look at the bigger picture - the real big picture. As shown in the monthly charts below, it is possible to count 5 waves from the 1997 low. And at the top of wave 5 a clear drop in momentum readings - a disagreement between price and momentum.

Apple Monthly Charts; Data & Charts esignal

Wave 3 on the monthly charts saw a 6 fold increase and wave 5 was little over 3 times wave 1 through 3. The real kicker though is not the price relationship but the time relationship. Wave 3 was 2months longer than 1.618 times wave 1; Wave 4 and wave 2 have a perfect 0.382 Fibonacci relationship; and wave 5 is 0.78 times wave 3!!!

Let us zoom in little more closer - the weekly charts. The 5th wave starting from the 2009 low can be interpreted in a couple of ways.

AAPL weekly charts; Data and Charts - esignal

My interpretation is that the first wave within the 5th was extended. In that case we have a perfect ending relationship - Waves 3+5 are 0.382 times extended wave 1. The momentum divergence here is more pronounced than on the monthly charts.  So there is a good chance that the top 705 was a wave 5 top.

Seeing the above evidence, I lean towards the possibility that AAPL has seen a MASSIVE TOP, a 5th of a 5th. If I'm right, we are possibly looking at AAPL declining to $80 in the next 3-4 years. Either AAPL will burn cash or competition will crush AAPL or some other form of roadblock could be the reason but we are not bothered about the reasons. Reasons will come later. Think such a decline is not possible?  Think Nortel, Juniper, Himachal Futuristic, Satyam to name a few.  Short term: Apple could bounce from sub 600 to 650-674, if it does, I think it will be a low risk selling opportunity.

The broader implication if this analysis is correct - the world is up for some nasty months.

Disclosure: I'm short Apple. I own a couple of Iphones and an Ipad and I will be Queuing up for Apple's mini Ipad.

  15 Responses to “Who rocked AAPL’s cart?”

  1. LOL I like your disclosure

  2. Goodness its been a while since we last heard from you…….you are spot on, as usual……a fervent request…..I desperately want your subscription (infact my email id would be on your sent items as you had sent an email and if you happen to see it you would know the context).

    Please allow my subscription, and be regular on this blog its been a while since you left it,

    Rest hope all is well (unlike the markets)!!

    Take care

  3. I am your ardent follower since couple of years. Always try to catch u either on CNBC or your blog.. Sir can u please update us about Indian market with charts..

  4. i am extremely sorry but i am sure u will go completly wrong that nifty wont cross 5815, i have covered my short in morning and went long

    • Im extremely sorry that CNBC have got the headlines wrong. Please read the transcript – it says, ” I still maintain a new high above 5815 is coming but possibilities are receding …” and only if Nifty drops below 5500 can one eliminate the odds of new high above 5815.

  5. hi jai
    it has been a very very long time, since we heard from u on the blog, i would like to ask u that are u going to revive the membership section as before?? i would like to renew and be a part of it.

    • Hi Shabbir/Sunil,

      I dont plan on reviving the paid blog. My current commitments with my institutional clients does not permit me to do that.


      • Jai,

        Thanks for responding……but, how do you address the needs of people like us….can’t you take even 1-2 subscriptions??? Would earnestly request you, once again,

        Looking forward to your confirmation,


        • Hi Sunil,

          Ill be violating my contractual obligation even if I took one 🙂


          • Fair enough…..I appreciate your response & contractual committement, guess we will have to rely on your inputs via TV/blogs (would request if that blog can stay regular, if your time permits),

            All the best,

            One of your earnest fan,


  6. thanks jai for the reply, apart from the institutional clients, is there any portfolio management service kind of thing which could be made available at some threshold amount, which we could subscribe too? a small request if u could express your views on the blog more frequently that would be great

  7. hello

    Sir its great to hear from you after so long long time.are you planning to be active again on this blog

    Thank you

  8. Dear Jai,

    Your view on Nifty & INR, please?


  9. Jay,

    Good to have you back. However, I would have appreciated had you accepted your Nifty views being wrong earlier in Jan – Mar period and later by at least making a post on that. Having an opinion is not wrong, but then accepting and explaining the reasons would have helped many traders as they would have learnt from your counts etc.

    Sadly now Elliot Waves is shaping up with more clarity and odds of being wrong at this stage is low. Therefore seeing you at this juncture makes me wonder why a Trader like you found it hard to accept market realities earlier. If you were busy with your private life, then I can understand and would ask you to pardon me.

    Nevertheless great to have a post from you after long. Welcome back !

    • Rohit,

      I have no illusions that every post of mine or view will be right . It will be downright silly if anyone holds such an opinion about me.

      I took on some institutional clients late last year and since then have been contractually obligated NOT to blog my views on the areas that I cover for them. (See earlier comments to others). So it should be quite obvious why I’m not blogging about the indices that matter 🙂

      I can talk about the past though.

      The decline since 5630 was anticipated to be in 5 steps but it came in 3 steps. Hence I thought the market was about to form a triangle to end the correction to the 2011 move. You would have noted my view that I expected a back and forth move between 5300-4900 before rolling over. The first 3 steps seemed to support the triangle view and the low at 5200 and change and bounce abv 5450 negated the triangle too. Hope that helped?

      I blog ONLY when there is something interesting in markets that I do not cover for my institutional clients. Also, I do not check the comments like I used to do several months ago. Hope that clarifies.

Sorry, the comment form is closed at this time.