Market Anthropology: How Do You Like Them Apples?

Tuesday, November 26, 2013

How Do You Like Them Apples?

Going on nearly a year since we first introduced the concept that compared the momentum breakdown in oil in 2008 with the momentum breakdown in Apple in 2012, the comparative profile still holds true today. For those not familiar with this work, here’s a snippet from last March that describes the parallels and underlying logic: 


If our memory serves us, Apple diverged from an arguably already exuberant growth path directly after its visionary and genius marketeer passed away on October 5th, 2011. Over the next year, the stock (which just happened to be the largest public market cap company in the world, as well as the most widely held security by hedge funds) roughly doubled from the intraday low on his death. Did it make much sense based on the fundamentals of Apple’s known and extrapolated market share or the underlying governing future of the company at the time? Certainly not – but momentum was at its back. The same market psychology and trend dynamics could be said for the oil comparative we have frequently used to presciently remain on the right side of the stock. Back in late 2007 as the equity markets were starting to cough out and the first signs of an economic downturn were becoming readily apparent, oil – the literal fuel for the economy, started its parabolic ascent. With hindsight 20/20,  it was anything but rational and largely a herded stampede – spearheaded by hedge funds both large and small that were bidding the commodity markets to icarus heights and the US dollar to its secular low.

So it comes as no surprise, that the most recent signatures of one of the last large crowded canyons are leaving similar momentum footprints on both the front and backside of the parabolic face. This is largely captured in the final culmination phase and expressed with similar moving average profiles and a stubbornness towards the downside without much relief for retracements.– Apple Picking 3/12/13

As the comparative pointed towards last month, Apple has largely consolidated its gains and traded sideways since finding a low in September. While Apple today has marginally broken above its October 29th high, there are some respectable near-term risks that the stock could once again cough-out with the equity markets and remain in a consolidating range a bit longer. 

Either way, we continue to like the comeback and position. 


For further reading on this concept – see some our previous Apple notes:

Apple Cider

Reboot Complete
Apple Reboots 
Apple Picking
Fruit Salad
Apple Turnover
The Universal Law of Gravitation