Time To Call The Doctor?
Or An Apple a day may no longer be as appetizing
Two news items caught my eye last week- both related to Apple, the current darling of the US stock markets. The first was something ridiculous and pathetic. A 17 year old Chinese boy sold his kidneys for a paltry sum to buy himself an IPod and an I Pad. Un-believable! The second was that Apple stock prices were not clearly above Google, the earlier leader in stocks. Allied news on this front was the mild noises being made by statisticians that Apple’s rise was distorting indices. For e.g. Nasdaq’s new high is all due to the power rise in Apple. This prompted me to look at Apple chart which I append below.
Apple has been in a bull market now for four years now. But what is more important is to observe the near ballistic nature of the rise in 2012. It’s a near vertical take off and when movements become parabolic, they are near the end. See chart 2 of the same with some modified trendlines added. The top formation is now better defined.
The current prices are abutting some resistance trend lines drawn off the previous major top as well as the long term low. It can be noted that the trend lines shown have acted as good support and resistance levels in all the past moves during the four year rise and the current confluence of resistance therefore should ideally work too.
Socionomics as espoused by Robert Prechter is often quite a good indicator of impending tops and bottoms. The extreme example of the Chinese boy doing something incredibly stupid just so he could own an Apple product is a clear indication of a social phenomenon extreme. Recently I also saw a hoarding in Mumbai for a Kids school. The hoarding claimed that ‘all kids would be given Apple I Pads to work with and the school has installed all Apple products in its classrooms and elsewhere’. I am inclined to think here that social mania for Apple has reached a point where the stock is about to top. The charts are in support of this conclusion too.
Where will this impact us? Well, US indices, Nasdaq in particular, are being driven heavily by Apple. Besides, it is also contributing much to the feel good factor in the US markets right now. All that can come to a slow and progressive halt if Apple were to stop its advance. We may then get into a risk off mode across the markets that will definitely spill over into Europe and then into Asia. So Apple may well end up calling the tops in many markets across the globe this time. Truly, a Global stock now?