It Was Just A Shakeout...

It Was Just A Shakeout... [¹]


By Rick Ackerman | 15 October 2007

We continue to view Thursday’s sharp selloff on Wall Street as little more than the beginning, and end, of a fleeting shakeout— one intended to bring stocks down to levels where they can be accumulated at cut rates by Da Boyz before the scoundrels goose shares once again, renewing an all but endless, and seemingly virtuous, cycle of asset inflation. The bullish case is buttressed by several factors that were elucidated in detail in the Touts section of Rick’s Pick last week. For one, the S&Ps, in the form of the E-mini futures, are tracing out a resolutely bullish pattern whose Hidden Pivot target looks sufficiently predictable that we’ve designated it a "hula number"— meaning that if it is not reached, and rather precisely at that, we (your editor, that is) will don a grass skirt and dance the hula in Times Square in the middle of winter.

But there are other factors that point higher as well, including an unachieved bull-market target in Apple shares that lies far above Friday’s settlement price. Precisely how far above is a detail we shall reserve exclusively for Rick’s Picks subscribers. However, suffice it to say, the target is well more than 20 percent above these levels. It is an important Hidden Pivot with a "sibling" midpoint at 161.00, and because of Apple’s bellwether status, we are obliged to take it seriously.

Concerning AAPL’s price action, typically, when a powerful uptrend gets too far ahead of itself, the inevitable correction will tend to display a magnetic attraction to the rally’s midpoint. Apple did just that on Thursday, plummeting from a record high $170 to an intraday low at $153 before bouncing back toward 161. "Don't be surprised if the stock's oscillations over the next couple of weeks" center more or less exactly on 161, we wrote in Friday’s edition.


Click Here, or on the image, to see a larger, undistorted image.

We fully expected the correction to eat up at least a week or two, since the midpoint is part of a very long-term bull cycle. In the event, however, although the 161 pivot was obviously central to Apple’s stabilizing swings on Thursday (see chart at top), by Friday the stock was consolidating well above it, mostly in the range $165-$167. The fact that AAPL may end up having required barely a "touch-and-go" at 161 to refuel for further flight suggests that its powerful long-term uptrend is far from over.

If the stock does indeed continue higher in the weeks ahead, we expect it to be joined by that other favorite of the maniacally bullish fringe, Google. However, another stock every bit as important as these two could drag down the whole enterprise: IBM, which need only fall four points from its current perch at 118.19 to hint of serious problems ahead for bulls [[It was up fractionally, today. AAPL closed down fractionally.: normxxx]]. Apple’s ethereal rally target would still be viable at that point, at least in theory, but we’d be combing our hula agreement by then, looking for an escape clause just in case.

Normxxx    
______________

The contents of any third-party letters/reports above do not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

The content of any message or post by normxxx anywhere on this site is not to be construed as constituting market or investment advice. Such is intended for educational purposes only. Individuals should always consult with their own advisors for specific investment advice.