Worm in the Apple
The financial wheel of misfortune landed on the Apple stock space Friday, even though the broad market ended up okay. Has the once sacred AAPL suddenly become the forbidden fruit?
After flirting with a closely watched area on the charts that analysts refer to as the "death cross," APPL has fallen from the tree as the stock's 50 day moving average is now below its 200 day moving average, and is off more than 23 percent since scaling to a record high in September at $705.Apple has traded lower nine out of the past 11 weeks, erasing approximately $150 billion in market capitalization. Investors who once saw no shortage of reasons to buy the stock now seem to find any and every excuse to bail out of it.
Why the exodus from the Garden of Eden? Even god himself was rumored to have the iphone 5, but earlier this week, a seemingly innocuous change in margin requirements for holding the stock triggered a huge sell off.
While margin changes are normally administrative in nature, they can signal a change in how risky investors perceive a security to be. Last year, a European clearinghouse changed its margin requirements on Italian debt -- which sparked a brutal nose dive in the country's government debt that drove yields to unsustainable levels above 7 percent.
Of course, like most stories, Apple’s demise is more hype than reality. The stock is still up 66 % since the beginning of last year and up 33 percent year to date. And Apple was still $100 billion bigger than the No. 2 company in terms of market cap.
And one stock does not make a market, or does it define the global economy. A consumer electronics company can’t prevent an entire nation from going over a fiscal cliff.
Trade well and follow the trend, not the perma-bull OR perma-bear “experts.”
Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia.
Best Trades to you,
Founder & President- Trading Advantage
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