Apple has started exhibiting the behavior that I have been warning about, dropping four and five percent over the last 24 hours or so, then regaining a third of the same.
This volatility should be of no suprise. If you look at the chart above, you will clearly and unequivocally see Apple (or AppleDAQ or NASDApple – regardless of the nomenclature) is essentially the NASDAQ, as was pointed out in previous posts from BoomBustBlog, ex. When The Most Contrarian Trade Of The Year Is No Longer Contrarian, It’s About That Time – Enter The Rotten Apple and that of ZH Apple Responsible For 90% Of Intraday NASDAPPLE Gain – to wit:
Or perhaps the 209 hedgies who rely on this stock for their year will play prisoner’s dilemma (and free ride) one too many times and dismiss their recency bias to remember that the first one to migrate wins when prices go vertical.
Again, as pointed out in When The Most Contrarian Trade Of The Year Is No Longer Contrarian, It’s About That Time, this process of Apple purging may have already started…
This interesting observation was brought up up in my Twitter feed, to wit:
# of funds in this order (%) since 12/2010: +1.4%, -4.0%, +8.7%, +4.3%, +5.4%, +3.2%, -25.8% (1st big drop)
@PierreLeroux28 @ReggieMiddleton I just find it interesting (if the data is accurate) that more than 1,000 funds sold out during rise
PierreLeroux28 Pierre Leroux So if institutions dump some $AAPL on strenght after that THEY ALSO BUY THE DIPS Like i will rebuy my 10 calls
Of course the lovefest with Apple dictates the BTD will reign, but suppose the dips are accompanied – better yet caused – by widespread use of technologies known as calculators, spreadsheets or BoomBustBlog subscriptions?
Correction, courtesy of @cperruna, author of the chart above:
The MarketSmith chart I uploaded was not correct but I have revised my feed with the correct data. I actually questioned MarketSmith when I saw a large drop in another leader I have been tracking. In any event, the updated data is as follows, as I posted on my twitter feed:
“Although Institutional #’s were incorrect, $AAPL still down 8% from 4/7 chart stks.co/3FrS| sponsorship is now 4,196 from 4,308″
This isn’t just about quantitative analytics uber blind hedgefund managers reaching for cap gains. There are very fundamental reasons for Apple owners to expect a pullback or slowing of growth. After all, that margin compression theory is ready to come into its own. We have created a very realistic scenario analysis that shows what could happen, and when, and topped it off with what we feel should happen. Interesting indeed! Subscribers, reference the Apple Margin & Valuation Note. I gave free readers an example of the evidence we uncovered showing Apple already experiencing margin compression and a loss of market share in one of its flagship products (Apple’s iPad Is Losing Market Share And …).
If the biz class 101 rules ring true, this could very ugly very fast… The Company had a slam bang quarter last, but much of that is essentially unrepeatable in the near term, reference Anecdotal Observations On Apple’s Recent Quarter.
Images: Flickr (licence/attribution)
About The Author
Reggie Middleton is an entrepreneurial investor who guides a small team of independent analysts to uncover truths, seldom if, ever published in the mainstream media or Wall Street analysts reports. Since the inception of his BoomBustBlog, he has established an outstanding track record