Slope of Hope Blog Posts
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Big Cap Tech Versus Internet Bubble 2.0
Hey fellow Slopers,
Mike Paulenoff's post Wednesday afternoon ("Big-Cap Tech Stocks to Watch") and the release of Groupon's earnings later in the day, prompted me to take another look the hedging costs of some big cap tech stocks along with the cost hedging Groupon and a few other Internet companies that went public in 2011.
Groupon dropped 15.6% after hours Wednesday after it announced a Q4 loss, but at least one observer was bullish on it on Twitter. You might recognize his name from the late '90s:
Well, I don't touch AAPL with a ten-foot pole. It's a beast. But it's also the only thing holding up this market. It seems to me it is on an unstoppable path to the magical, round, headline-grabbing number of $500 per share. That price just so happens to coincide with a very long-term trendline, going back almost two decades.
I submit to you that AAPL will cross $500, causing rejoicing everywhere, and then start to slip. Trees don't grow to the sky, and neither do iPhones sales.
Obviously calling tops has been a hopeless task during this big bull move, and on the bigger picture I'm not seeing much to suggest that we might see a really big reversal here. We don't have anything in the way of large bear patterns here really, on equities anyway, and the lack of decent big support trendlines on the major indices makes it particularly hard to tell when a big reversal might happen. There is also currently very little in the way of topping patterns, and we are between big resistance levels on SPX.
That said, though it might be hard to point to a recent example, nothing goes up in a straight line, and even in a big bull move you will see some substantial dips. It might be another mirage of course but we are once again in an area where we might see such a dip. Let's consider the evidence.
I posted the Transports index chart yesterday and observed that the rising support trendline from the October low was being tested, and that a break below it would be a sign of weakness. Well it has broken, and that is most definitely a sign of weakness: