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Random Thoughts: The Reverse Newton


Tying up a trying five-session set.

Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.

It's been a busy week on Wall Street; between the FOMC meeting, stress tests for the banks-Citigroup (C), SunTrust (STI), Met Life (MET) and Ally Financial missed the cut-a disgruntled former Goldman Sachs (GS) employee venting in the media, and options expiration, there has been no shortage of action.

The most intriguing dynamic, however, may be the price action in Apple (AAPL), which lifted as much as 10% on the week and has rallied almost 50% this year (and it's only March!). To put this in perspective, Apple-sporting a market capitalization in the $550 billion range-is valued more than General Electric (GE), Intel (INTC), and Google (GOOG) combined.

To be clear, I love my iPad2, iPhone4, and iTouch; as a consumer, I drank the Kool-Aid a long time ago. As a 20-year stock market veteran, however, I feel like I've seen this movie before. Indeed, if you overlay the current trajectory in Apple against Google in 2007, they align perfectly (hat tip Doug Kass on bringing this to my attention).

Click to enlarge

Past performance is obviously no guarantee of future results-a smart man once said that you can pick the direction of stocks or the timing of a move but you'll rarely pick both-but this warrants a mention as the world holds hands and Siri sings "Kumbaya."

Of course, where you stand is a function of where you sit, and the single most important rule of thumb in the markets is to sync your time horizon with your risk profile. We've seen this parabolic frolic before and it was always different-until it wasn't.

Sir Isaac Newton would most certainly agree.

Random Thoughts:
  • We spied the pattern on Wednesday that "works," through a pure technical lens, to S&P 1420 or so, although I'm not leaning that way (I update my posture in real-time on the Buzz & Banter). See both sides as we edge into March Madness.
  • I recently read that short interest in Research in Motion (RIMM) is exceptionally high, and perhaps for good reason-Apple is eating its lunch. Still, this is on-the-margin bullish through the lens of supply/demand dynamic (as the shorts will presumably have to cover one day).
  • I haven't touched my RIM position since I rolled the dice and bought some April 15 calls with house money (after riding the stock from December into January), but I may roll those puppies out and (literally) buy more time.
  • While I didn't see the game-I was too busy, and I suppose that's a good thing-I heard that Syracuse looked awfully sloppy in their win against 16th-seed UNC-Ashville. I know the knock on this team, particularly without their starting center, but I'm not sure I've ever seen a more maligned 32-2 team in history. These kids have been through the ringer this year; they deserve to go on a magical run.
  • Finally, on a housekeeping note, I will be heading to Palo Alto on Monday afternoon to powwow with the brass at Facebook, Twitter, and Linked-In. While I hate missing market action, I would be lying if I said I wasn't excited to socialize with the lead dogs in the social media phenomenon. I will try to post from the road but lest I can't, lemme wish you the best of luck as you navigate the world's wildest reality show.
  • May peace be with you.

Twitter: @todd_harrison

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Positions in RIMM, SPX
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