This week — this month — more than ever has been a lesson in the power of the external. All the charts, statistics and revenues in the world are great, sort of like measuring the tide and the frequency and size of waves on local shores. You believe what you see. But the recession worries, housing subprime crisis, breakdown in financial institutions, etc. are certainly earthquakes from beyond our vision. It's like an earthquake in Indonesia that can cause a tsunami to hit Hawaii or North America. And that's the simple lesson.
Apple has nothing to do with Countrywide Financial, let alone a quake on the other side of the ocean. But today AAPL trades at 160, 20% below its recent high, and there is no way to argue against a trading strategy along with (or without) a core, long-term position. At the end of December, AAPL traded at 200 and far above its simple moving averages. Clearly not a buy, but I was among those who didn't consider selling shares. The street sold off just about everything since the start of 2008, and Apple was caught in that tsunami.
It will be a long time before the confidence of the market is reestablished. Until then, there's no point in fighting the price action. Any movement up is paired with lowered volume (re: Apple, Google, RIMM, etc). There is no conviction from the bull side, and that's why it's impossible to go long-term with new positions right now.
Apple's earnings are out on Tuesday. The telescopes are focused. Fear of the tsunami prevails, but will that fear continue?
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