Elliott Wave 5.0 "Reboot"

Sunday, January 10, 2016

Apple Bear Market Review And The Gold/Apple Ratio

Apple is in a bear market that started many months ago even stretching back to early 2015, about a year ago.  Sure wave counts are great, but interpretation is always an issue. In order for this decline to become a full fledged impulse decline and look have decent in relation to each other wave, Apple would have to crash much further. All you would have to do is replace my "AB" wave with a 1-2, 1-2 wave.

If that were the case I assure Apple's decline would not stop at $55 or even $45. So a big impulse decline is not an option at this time. Besides, if gold stayed the same, then we would have about a 20:1 gold/apple ratio. The amount of Apple shares we can buy with one ounce of US dollar priced gold.  Making a few quick ratio calculations, it looks like a 10:1 ratio is very expensive and a 21:1 ratio would be getting to the very cheap side.  Right now we are sitting at a about an 11.38:1 gold/apple ratio. This is still very expensive when compared to gold so 15:1 may be a ratio where Apple's stock may start to get cheap compared to gold. 

A basic 15: ratio is about the $73-$75 Apple price level. At the $75 price level the gap that Apple has down there will certainly be closed off. This would be pushing a diagonal wave count, but not unreasonable.  Apple is a bubble era stock so buying on the dips would be financial suicide. At a minimum Apple would still have to go below its August 2015 low. 

Also, if Apple were in a bigger triangle it could turn and roar way before it crosses the August bottom price level.   As the chart price is crashing all the fundamental bearish reasons for this crash are starting to come out, and I would truly waste my time regurgitating all this news when every mainstream media analysts is already spending his time doing that work.  Besides these analysts that now realize that the iPhone has had its production cut couldn't see it coming when they were calling for Apple to still go to the moon.  That 2015 triple top was a warning that shit was going to go down. 

You look up the analysts' recommendations and chances are you will see that the majority had buy or hold recommendations on Apple. 

This is the intraday chart of gold and how it ended on Friday.  I am showing you a very bullish wave count, which I typically start with if it fits early enough. Of course, there would be next to no room for this pattern to move radically away from its script, before I toss it.  If it fails early enough, then we know that a bear market rally is still in effect. My top trend line is the 2012 peak resistance line so we have a line drawn in the sand that gold has to blast through, if a bigger bullish phase is in play.

My small middle upward trend line, gold has found resistance and support so when this line breaks down, then my pattern may not be far behind before it gets trashed.  Another smaller wave 1-2 would have to be created and then the waves get too small to label as after that only waves 3-4-5 will finish.