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.
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.
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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