Friday, April 6, 2012

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...

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