Wednesday, July 24, 2013

Rocks for Jocks

For lack of a better analogy, there's mountain building going on these days. Those dogmatic bears that continue to linger in positions and perspectives longer than they should are causing significant uplift, in what geologists call an orogeny

Oh behave, it's legitimate jargon - look it up.  

Metamorphism, subduction - they're just another fancy way to describe natures recycling process. However, for market participants today, it's the capital exchange from the bears that has helped contribute to the great deformation of the S&P's "crust" higher.  
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Although the equity and credit markets were hit this past May when chatter of a Fed taper began to grow, historically a less accommodative Fed marks the transition to a more resilient economy and a firm bid beneath the equity markets. We outlined these thoughts in June (here). Considering the rise that the equity markets have made subsequent to a less accommodative Fed (both 94'-00' & 04'-08'), the peak for this mountain - as irrational as it may be - could be significantly higher than most participants expectations. 
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Despite taking its time in carving out a base, Apple continues to follow the positive divergent momentum pattern in oil, circa 2008/2009, that we have used as a guide over the past year (see Here). We continue to like Apple going forward and believe it should again begin to run with the broader market. 
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This opinion is in contrast with the momentum break in Microsoft, circa 2000 -  that we have followed and highlighted from time to time. Although Apple's performance has loosely followed Microsofts's rise and breakdown in 2000, the momentum signature (as expressed in our oil comparative) is quite different. 
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Similar to oil and our recent silver comparative with copper (see Here), this positive momentum pattern leads us to believe that Apple will at the very least attempt to challenge its highs from last year sometime in the future. Considering Apple has mostly acted as an anchor with respect to the S&P's performance over the past year, a correlated trend with the S&P will contribute significantly to those forces building this mountain. 
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 As always - Stay Frosty - but keep things simple. This is basic stuff - rocks for jocks.