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Apple a Post-Bubble Victim?


Company not immune to downturn in discretionary spending.

I've always been interested in market psychology. Why? Because, like they say, what the market knows isn't worth knowing and the reaction to the news is more important than the news itself.

Plain and simple, the stock market runs on emotions, namely fear and greed. Greed is typically at its greatest after a powerful, parabolic move up. Fear creates 'V' bottoms like we saw in banks in July. But the key to shorting a post-bubble stock is that you must wait for the trend, watch the security 'break' and then short an unsuccessful retest of the highs.

I've highlighted homebuilders, the NASDAQ 100, Japan, Google (GOOG), China and fertilizer manufacturer, Potash (POT). For posterity's sake, and to show this process works, I will show highlighted post-bubble charts as they stand today.

My newest post-bubble victim? Apple (AAPL). I do not dispute that Apple is a great company and I am a user of its product. But its move was parabolic, and it has broken and re-tested. Also, the short ratio is a whopping 0.5 days to cover and it is still a consumer discretionary company. And I have a dim view of the consumer.

Nikkei/Nasdaq/Homebuilders/China Chart

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Nikkei/NASDAQ/Homebuilders/Google Chart

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No positions in stocks mentioned.

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