Yesterday I compared the Nasdaq and the S&P 500 to discuss the market’s tenacity. As you’ll remember, I used the Nasdaq Index as a proxy for bullish sentiment because it typically attracts more aggressive buyers than does the S&P 500.
But I forgot to mention an important caveat to this comparison…
In one word: Apple.
Beyond being the world’s most valuable company, by market capitalization, Apple (NASD: AAPL) makes up about 10% of the Nasdaq Index. So when Apple stock goes up the Nasdaq goes up. And when Apple stock goes down, the Nasdaq goes down.
So it’s no surprise that today the Nasdaq is the only U.S. stock index in negative territory… all because the numbers Apple released last night were hugely disappointing.
As far as I’m concerned, Apple’s ride is over.
Take a look at this Heads & Shoulders pattern in Apple’s stock…
Such a pattern spells doom for a stock. Especially, after the stock has made an exponential move higher (think “bubble”).
Has Apple’s rise been exponential, blasting into “bubble” territory?
Absolutely. AAPL was up 801% between 2009 and late 2012. That’s simply unsustainable.
Plus, the stock has now broken through that blue line on the chart – the neckline – and technical analysts like me know what happens when we see that…
The stock drops like a rock.
I expect Apple to drop to $300/share before long. This will flush out the fantasy-land buyers who thought the stock would go above $1,000/share.
Think again dreamers!
If you haven’t done so already read the Survive & Prosper issue on “Economic Issues Around the World.”