Friday, January 29, 2010

The Market Loses its General; Apple (AAPL) Gives Up the Ghost

One term I used a lot in 2008 was the "market generals" i.e. the leadership stocks.  I mentioned about a week and a half ago that almost all the momentum hedge fund filled "momo" (momentum) stocks were showing very bad signs of rolling over.  [Jan 20, 2010: Can Google Change the Tide for Hedge Fund Momo Stocks?] Except Apple (AAPL) aka "the teflon stock".

These are our generals - places institutional money hides out in while other things fall apart.  Their importance waned in 2009 (post February) since every stock in the universe went up, in the babies with the bathwater rally - in fact some of the worst junk rallied the most - heck even Fannie Mae and AIG enjoyed rallies and those are zombies. 

Unfortunately having general status creates very crowded trades and despite having among the best fundamental stories, when X amount of instutional money flees en masse the emergency exit door tends to leave lemmings crushed.  We saw that throughout 2008 and early 2009.

Today the market has lost Apple, as the 50 day moving average has been broken.

On the positive side, as patient buyers we might be able to soon start picking away at some excellent companies at far lower prices then the "momo boys" have been buying at.  Of course that is knife catching action so buys will need to be layered into at a prudent pace. The 200 day moving average for Apple is around $175 where one would assume the bulls make a huge stand when and if we get there.

But overall you do not want to lose your leader - it is not looking good for bulls here...

EDIT: I just went back to look closely at the data from November 2009 and S&P 1071.5 is "the gap" that needs to be filled.

No position

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