Keeping an eye on Intel

I see Intel as very weak these days.  Laptop and PC sales are slowing in favor of tablets and cell phones.  Intel is very late to the game and instead of battling the always under-capitalized AMD on this front like it has been used to getting away with, it is battling the likes of Samsung and Qualcomm and Apple.  None of these players are children as AMD is (at least on a relative basis).

In addition, Intel's die sizes are getting bigger in order to deliver the performance.  Their power consumption is pretty good in their newer mobile CPUs but the profitability is waning due to ridiculous die size.  Also, fabs are getting exponentially more expensive.  A new bleeding edge chip fabrication plan (AKA "fab") used to cost $4 billion.  Now they cost $40 billion.

The chart of Intel is one that I have seen many times.  The shorts are making probing attacks along the border looking for weakness.  They seek to find the price at which current shareholders are willing to join them (the shorts) in their selling.  In reality, stocks are a kind of popularity contest.  Herds LOVE to characterize its members as popular and unpopular.  If you are unpopular then your shares get crappy multiples, crappy valuations.   But if you are a Wall St darling then you get to have a $60 billion with a B market cap like Facebook does even though you might not really accomplish any economically productive work (did I mention that FB shares are a massive bubble?). 

In any case, popularity is a strange thing.  It can be won or lost in an eye blink.  The herd is fickle.  The minute Intel shares fall below that support line they will become very unpopular, very quickly.  When nobody is testing your defenses you can be weak but still stand.  But the shorts are running probing attacks on the Intel front line on a regular basis now.  One of these days real soon now, that line is going to fail to hold.  There will be a breach in the shields, direct hit on the warp engines, no escape for Intel.  Then you will see panic as the 3rd wave sets it.

It's coming just as certainly as I am typing this.  The chart is telling me it will happen.  The only thing that will save it is a break up and out of the overhead resistance @$28.  I don't see it happening.  My target price for Intel shares is $8-$9.  When you see them hit that, start buying with both hands.  Sound crazy?  Where DO I get these crazy numbers from, anyway?  Yeah, you guessed it.  From the chart.

I model Intel as being in the middle of a massive, multi-year 5th wave ending diagonal.  I believe that a break down of that left to right up-sloping line will serve to transition the shares from being in a B wave (which is an uptrend) to a C wave which is a powerful downtrend.  In fact, once that breaks down, a rapid trip to below $12 becomes a high probability event.  If the shares break down like that then they will likely undershoot because that is the nature of ending diagonals.  A throw under would be really high odds.  

Notice how the chart is a declining double top.  Notice that middle 2 waves have been multi-year deals but that wave red 1 down was very rapid as was red 2 up.  2nd waves are often vee waves.  Since then it has been slow moves up and down.  We are ready for another rapid move down, probably similar to the initial trip to the lower red support line.  But this time that support line will likely not hold.  If Intel does that, keep in mind that it will be good reason to buy the shares despite what horrible sounding, company threatening news may accompany the price drop.  Bear markets end with bad news just like bull markets often end with good news.

One more thing.  There is no sign right now, no indication that my model will play out.  The chart, according to most stock market participants, could play out in 50 different ways.  Nobody can predict the future moves of stocks, right?  Well if that is so then how did it happen that Wall St ended up with all the money for doing very little work?  Truth is, nobody can predict the future but they can predict the odds of a given outcome.  My guess is that it would shock most people to learn just how sophisticated, how predictive, how people savvy Wall St's trading computers are.  

If IBM can build Watson to beat people at Jeopardy, Wall St can build trading computers to beat people at stock trading.  Heck, they can pay IBM to do it and I'm guessing that they have already been doing exactly that.  The set of trading computers does not have to beat everyone.  It simply has to beat enough of the people to get full stomachs and super-yachts.  When wildebeests cross the river that is teeming with crocodiles, do the crocs kill all of the migrating herd?  Of course not.  

But in real financial life, when there are too many financial crocodiles and not enough people to prey upon, that is when the debt Ponzi collapses.  That is when the crocs start infighting. That is what is happening right now.  Old people are getting out of the stock market and young ones are not getting in.  Young people with low salaries and few jobs have to pay their Obamacare premiums before they can save anything for retirement.

This and this alone is why Wall St. will collapse.  It is right there for anyone with the eyes to see it.