586 Billion Caution Flags

By: Erik Swarts | Wed, Apr 4, 2012
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Over a 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.

Mega Cap Performance

Financial Times List

Financial Times List

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%.

Mega Cap Performance AAPL MSFT PetroChina

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.

SPX MSWORLD Chart

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...

 


 

Erik Swarts

Author: Erik Swarts

Erik Swarts
Market Anthropology

Although I am an active trader, I have always taken a broad perspective when approaching the markets. I respect the Big Picture and attempt to place each piece of information within its appropriate context and timeframe. I have found that without this approach, there is very little understanding of ones expectations in the market and an endless potential for risk.

I am not a stock picker - but trade the broader market itself in varying timeframes. I want to know which way the prevailing wind is blowing, where the doldrums can be expected and where the shoals will likely rise. I will not claim to know which vessel is the fastest or most comfortable for passage - but I can read the charts and know the risks.

I am not a salesperson for the market and its many wares. I observe it, contextualize its moving parts - both visible and discrete - and interpret.

I practice Market Anthropology - Welcome to my notes.

Erik Swarts is not a registered investment advisor. Under no circumstances should any content be used or interpreted as a recommendation for any investment, trade or approach to the markets. Trading and investing can be hazardous to your wealth. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This is strictly for educational and informational purposes only. All opinions expressed by Mr. Swarts are subject to change without notice, and the reader should always obtain current information and perform their own due diligence before making any investment or trading decision.

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