Apple May Be On The Cusp For A 15-30% Relative Underperformance by Eric Bush, Gavekal Capital

Calling a top in Apple’s stock has been a fools errand for most of the past 15 years. Major pull backs in Apple’s stock just haven’t been very common. Apple experienced about a 55% decline in 2008-2009 and another approximate 45% decline in 2012-2013.  Other than that, as the chart below shows, its been a pretty smooth (and impressive) ride consistently higher.

Apple stock prices

 

However, for the first time in well over a year Apple has lost steam relative to the MSCI World All-Country Index. In our point and figure chart below, Apple has recently had a 10% relative underperformance against the global stock market (not including the -3% decline today).

Apple’s stock is at a very precarious technical position. It managed to break above previous highs in late 2014, however, it is now starting to retrace those gains and is back below the highs made in 2012. If Apple retraces 50% of 2014 gain, which could be the minimum expected move for this type of configuration, we are looking at at least another 15% relative underperformance in the near future. And quite often stocks with Apple’s configuration will retrace almost all of the gains to retest the high performance bullish trend line that has been in place since 2013. If this were to happen Apple would underperform by about 30-40% from today’s prices.

Apple stock prices

 

Of course as the biggest stock in the world this would undeniably have ramifications for stock indexes around the world. Perhaps, it would lead to the headline indexes following the many stocks around the world that have already moved lower. Apple has made history by becoming for the first stock to trade above a $700 billion market cap. It seems that it may not have the muster to reach $800 billion, at least at the present time.

Apple stock prices

 

Disclosure: The above mentioned security may be in our current portfolio. Please refer to our website for a current list of our holdings – http://www.gavekalcapital.com/ucits/