Short the iPhone (and everything else.....)

Let me save the bulls some time and say two things: first, I am jumping-up-and-down, wild-eyed, chart-crazed bearish right now. So if you want to take that as a marvelous contrary indicator, please do so. Second, I've even done some legwork for you. The call option on the S&P 500 for July at $1,625 (which, gosh, should be easy - that's only 7.5% higher than the current market) is a mere 40 cents asking price! The symbol is SPB-GE. Go nuts.

For the bears and my adoring fans: today's post will be more jaunty than usual.

Let me explain the title of today's entry a bit. First, by way of apology, let me say I've been Steve Jobs' Biggest Fan since before most of you people even heard of the guy. I've followed him since 1982, and one of the main reasons I even live in this area is because My Idol is here.

I think Steve's return to Apple in 1997 is one of the great acts of justice in human history. Displacing people like Michael Spindler and Gil Amelio - who have all the charisma of used shag carpeting - made the world a better place. And I used to be an Apple employee - number 9653 - back in the late 80s. So I've got no ax to grind.

But.

I also know that things run in cycles. And I also believe there is an inverse correlation between hype and results.

Take the Segway for example. Before this was introduced to the world, rumors flew around about Project Ginger (its code name). Breathless reviews from the likes of Larry Ellison and the aforementioned Mr. Jobs made people wonder what this miraculous creation was. I believe it was Jobs himself who said that entire cities would be designed around Ginger.

Well, they weren't. And won't be. The fact is, for all its hype, Segway has wound up to be little more than a curiosity. It still attracts attention. But most people gawking at a man buzzing about on a Segway are less interested in the mode of transportation than they are at the fact that the rider will probably die a virgin. At least, that's what I'm thinking. I'm a geek. But, Jesus Christ on a Biscuit, I'm not going to be riding around town on a Segway.

You know where this is all leading. That's right, the iPhone. Good God, I've never seen hype like this. You'd think that, given the price and hype, the phone would jump under your desk and pleasure you orally between calls. Two facts keep leaping to my mind. First, phones can be had for $9.99, far less than the $500 introductory price of the iPhone. Second, I don't know about you, but I've got a phone. And I'm pretty happy with it.

People are expecting the iPhone will perform miracles with Apple like the iPod did. It won't. Let's turn back the pages of time a bit and understand the iPod introduction better.

The first iPod was introduced early in October, 2001. This was not even a month after the terrorist attacks. People scoffed at the introduction. Call it anti-hype.....sort of the reverse of what we are seeing today. Here was this microcomputer company, which for years had sold multi-thousand dollar machines, entering the consumer electronics business dominated by low-end players like Sony.

Now, as you can see from the graph below, Apple's stock did pretty good after the introduction, but it faded back again, and it sank to even lower lows. The stock got down to something like $6.50 (don't you wish that time machine was handy, folks?) So the iPod clearly wasn't seen as any kind of savior for the company, nor was it the object of frenetic optimism.


So what happened next? Well, the Apple magic started to work. The brilliance of offering an accessible way to purchase music, great software to manage your music collection, and an elegant, highly mobile piece of hardware started to take hold. And Apple's stock moved up not hundreds of percent, but thousands of percent. The iPod made Apple more successful (and the stock more expensive) than ever.


Which brings us to today. Apple is deep into triple-digit territory. Steve Jobs would probably win the presidency of the U.S. if he ran. And there are thousands of Apple zillionaires running around Cupertino. The company seems like it can do no wrong. I notice even The Economist put Apple right on its front cover last week.

I took all this into account. And although I rarely depart from charts as my rationale for decision-making, I bought a bunch of Apple puts early this morning. And, as the market closed today, those puts were already up 35%. Not bad.

Now, it's not that anything horrible was announced from Apple today. Steve Jobs gave a talk at the WWDC, and everything seems pretty hunky dory. But if I can smell a top, folks, this is it. And I'm not predicting Apple will wind up like a completely devastated shell like, oh, Sun Microsystems. But if the contrary workings of hype have any merit, this has got to be one of the all-time great hype fades of modern history.


Phew. OK. Back to the markets. As I said earlier, I'm more bearish than normal. Which is saying something. Part of the reason is that, viewing the $SPX minute graph, I sense a sea-change has taken place in the trend. I've drawn it below.


I have acquired an ungodly quantity of Russell 2000 puts, predicated on the notion that the channel, drawn below, will likely be broken. And the beauty part is that if I'm wrong, I'll know swiftly, and my losses will be manageable.


I look at a chart of the $INDU below and get so excited I must excuse myself from standing for fear of embarrassing both myself and those around me. (In addition to generating pangs of jealousy amongst my bullish readers). To me, this is a chart jumping up and down, shouting "Top!" with great gusto.


Reducing the granularity of the chart to a weekly from a daily, we can plainly see the bearish engulfing pattern which took place last week. This week - Wednesday, Thursday, and Friday, to be specific - is loaded with important economic indicators. Here's hoping they shove the markets lower and help increase the minuscule bits of angst floating about into a growing sense of dread.


The S&P 500 weekly offers, to my eyes, similar conclusions.


Let's look at a handful of individual stocks. I'm going to get into a short position with Amazon (AMZN) tomorrow morning.


CAH, offered by a thoughtful reader, also looks like a sharp short.


As does CEG, also offered by a kind reader (and I do appreciate those emails and charts, folks).


Let's pause another moment and consider CROX. Let me say right now I am not short this stock, and I don't plan to be short this stock. I nibbled on some puts a couple of weeks ago, and I was promptly stopped out. I've learned my lesson. This is a momentum play, pure and simple. and I shriek like a little girl when I see this chart. No touchee.


We can compare CROX to a similar stock from many moons ago called Taser (TASR). Here's what TASR was doing back in the day. Check out the similarities of both price and volume action.


What happend to Taser after it peaked? Well, you already know that answer, don't you? Here's a percentage graph. Will CROX suffer a similar fate some day? I bet it will. I really doubt you can ply an ongoing competitive advantage off some cheap-looking fad-driven "shoes." But I, for one, am not going to guess when the momentum is going to run out. No thanks.


OK, back to shorts. Entergy (ETR) is a good idea to consider. And remember, folks, these are just ideas. Read the top of the screen. None of this is advice. I'm just spoutin' my feelings and notions. So settle down.


I mentioned GOOG as a long idea. Ya know what, I've changed my mind. I think I might buy some puts on this one, mostly for the same reasons as Apple, although not nearly to the same extent. I see a failed breakout happening here. Maybe.


And if you think the energy/oil run has gone berserk, Exxon Mobil (XOM) presents a relatively low-risk to play this on the bearish side.


That's it for the day. If the week rolls in my favor, you can expect more videos and such. Until then, please think about what I've said above. I'm right from time to time.