Market Anthropology: 586 Billion Caution Flags

Wednesday, April 4, 2012

586 Billion Caution Flags

Over one month ago I constructed the following chart that described the two previous occasions where the largest market cap company in the world went parabolic. Not surprisingly, on both occasions it marked the beginning of the end of the run in equities. 

I added Apple for contrast, considering it was now the largest market cap company in the world and had also exhibited parabolic price signatures.

Roughly six weeks later, Apple has now firmly left the parabolic stage and has gone straight to the  vertical (see Here) horizon. What was a 20 year performance record of 2900% in February – quickly became over 4000%. 
I find it interesting and noteworthy, that after yesterdays once again buoyant bid – Apple has pulled up next to Microsoft’s market cap high from 2000 of roughly 586 billion. The following chart has striking balance, albeit a pronounced head and shoulders top – when expressed through the relative performance of the SPX and MSWORLD indices. 
Regardless of public opinion, both the informed and the ignorant –  a move such as this is  unsustainable for Apple and very likely marks a historical highpoint for the company for some time. With that said, and as proven on a daily basis since early December, markets can remain irrational much longer than most suspect. 

It should be noted that both previous successors to the title of World’s Largest Market Cap (that went parabolic) – certainly did not go bust, but maintained a leadership position within their respective industries. Their valuations simply matured and loss the enormous momentum drive that propelled them to unsustainable growth trajectories. 

Unless of course it is different this time…