FINANCIAL ICEBERG
Always consider hidden risks
MARKET INSIGHT
If you would like to receive our free daily markets updates, please Sign-Up
APPLE Correlation Technicals - Correlation Risks Back into the Danger Zone ? $AAPL #aapl
December 21 ( From TradingView )
December 21 ( From TradingView )
December 21 Correlation Risks Back into the Danger Zone ?
Last Research for 2014 - back on January 11 for the next one.
I wrote a few times last week that the Correlation Risks were Increasing.
It will be into the Danger Zone when Correlation number with the SP500
when will be back below the 0.75 treshold level.
On December 10, It did reach 0.84 and rising slowly on Correlation with the
SP500, so still far from the critical level of 0.75 but worth noticing.
It first reached over 0.75 on December 10: Since then, it stayed above for 7 consecutive days, and prior to that,
It reached over 0.75 on November 20 and stayed above for 7 consecutive days. It then reached over 0.75 on October 16 and stayed above for 17 consecutive days. one of the longest ever in history. ( See chart below )
It reminds me of the same long correlation risk phase between May 23 and June 11 2014 and the other phase of August 12 to August 27 and November 20 to December 1st.
What happened next is a correction in Price of Apple Shares: Til June 24 ( 4.2% taking closing prices ) in the first case before resuming uptrend and in the second case - September 9, a 5.15% price correction and for the tird case for December 1st, a 3.6% correction.
( See chart below, vertical amber line ).
But this time, it should be a smaller correction as portfolio managers should have already done their
rebalancing being so close of the end of the year.
Correlation factor with the SP500 is a lot more crucial to follow than with the XLK ETF.
So now, when we will see Correlation with the SP500 getting under 0.75, then Apple Shares will be at risk of underperforming SP500 as history suggest. ( See chart below ).
We had quite a ride in terms of high Volatility, a strong correction from the SP500 from December 8 to a rebound phase since December 16 and swing from Correlation Risks not seen for awhile just added tremendously to the Price Volatility of Apple Shares. The Correlation Risks Cycle is a lot more longer than we get used to see and I think it will change soon.
All that is just telling me to expect more volatility for the next two weeks because of lack of liquidity and players til the end of the year.
Reaching a new high ever on the Mighty SP500 did help tremendously the Shares of Apple. But from here, it will be more difficult to achieve as SP500 and Apple Shares have become ONE. So a few tailwinds that can face Apple Shares in the next few weeks...
More details on specific trading levels on the Daily tomorrow.
Happy Holidays.
More explanation of the Correlation process below...
I started to analyze Apple shares in a complete different way using correlation with the sector ( Taking the XLK - Technology Select Sector SPDR as proxy ) and with the SP500 Index on the other side...
Three main observations emerge from the correlation approach:
1) Correlation between Apple Shares and XLK and SP500 are very often the
same - see chart below. It tend to peak at the same time and bottoming
at the same most of the time.
2) When correlation is high, the risk is a slippage in the price action of Apple
Shares - see chart below.
3) When correlation is low, usually a bullish price action is foreseen for Apple
Shares - see chart below.
CORRELATION
Apple Shares and
SP500 Index ( SPX )
( Blue Area )
CORRELATION
Apple Shares and
XLK - Technology Select Sector SPDR
( Grey Area )
Apple Shares and
SP500 Index ( SPX )
( Blue Area )
CORRELATION
Apple Shares and
XLK - Technology Select Sector SPDR
( Grey Area )
November 30 I am Weighting on You dear SP500 ?
Apple market success have become a market problem;
( look at the right side for details )
1) Its market capitalization have become so huge into the market
2) Its market weight index from the SPDR SP500 Index is at 3.86%,
bigger than the SPDR SP500 sub index of:
Telecommunicaton Services at 2.38%
Utilities at 3.05%
Materials at 3.28%
3) The Information Technology weighting within the SPDR SP500 ETF is
19.85% ( in which Apple shares are classified ).
Check below the details on which ETFs owns Apple Shares and the
weihting in each case... So Apple have become big among ETF s holders
and is so huge that it became a market sentiment and trend indicator...
All that to say that the market lately have been behaving like Apple, like a magnet.
I wrote a few times since the last two weeks that the Correlation Risks were Increasing. It is almost in the Danger Zone yet when Correlation number with the SP500 will be below the 0.75 treshold level.
On November 28, It did reach 0.92 and declining slowly on Correlation with the SP500, so still far from the critical level of 0.75 but worth noticing.
It first reached over 0.75 on November 20: Since then, it stayed above for 6 consecutive days, and prior to that, It first reached over 0.75 on October 16: Since then, it stayed above for 17 consecutive days. one of the longest ever in history. ( See chart below )
It reminds me of the same long correlation risk phase between May 23 and June 11 2014 and the other phase of August 12 to August 27.
What happened next is a correction in Price of Apple Shares til June 24 ( 4.2% taking closing prices ) in the first case before resuming uptrend and in the second case - September 9, a 5.15% price correction.
( See chart below, vertical amber line ).
But this time, it should be a smaller correction as portfolio managers will take most corrections to pile up in Apple Shares... But the impact on the whole market Sentiment and Trend will be enormous...
Correlation factor with the SP500 is a lot more crucial to follow than with the XLK ETF.
So now, when we will see Correlation with the SP500 getting under 0.75, then Apple Shares will be at risk of underperforming SP500 as history suggest. ( See chart below ).
We had quite a ride in terms of high Volatility, a strong rebound phase from the SP500 since October 16 and swing from Correlation Risks not seen for awhile : the Correlation Risks Cycle is a lot more longer than we get used to see and I think it will change soon.
All that is just telling me to expect more volatility for the next two weeks.
Reaching a new high ever on the Mighty SP500 did help tremendously the Shares of Apple. But from here, it will be more difficult to achieve as SP500 and Apple Shares have become ONE. So a few tailwinds that can face Apple Shares in the next few weeks...
More details on specific trading levels on the Daily tomorrow.
November 9 Correlation Risks Near Danger Zone ?
I wrote a few times since the last two weeks that the Correlation Risks were
Increasing. It is almost in the Danger Zone yet when Correlation number with
the SP500 is below the 0.75 treshold level.
On November 7, It did reach 0.76 on Correlation with the SP500, so almost at
the critial level of 0.75.
It first reached over 0.75 on October 16: Since then, it stayed above for 17
consecutive days, one of the longest ever in history. ( See chart below )
It reminds me of the same long correlation risk phase between May 23 and June 11 2014 and the other phase of August 12 to August 27.
What happened next is a correction in Price of Apple Shares til June 24 ( 4.2% taking closing prices ) in the first case before resuming uptrend and in the second case - September 9, a 5.15% price correction.
( See chart below, vertical amber line ).
But this time, it should be a smaller correction as portfolio managers will take most corrections to pile up in Apple Shares...
So it is a huge risks that Apple Shares are facing for the next few sessions in terms of relative performance compare to the SP500.
Correlation factor with the SP500 is a lot more crucial to follow than with the XLK ETF.
So now, when we will see Correlation with the SP500 getting under 0.75, then Apple Shares will be at risk of underperforming SP500 as history suggest. ( See chart below ).
We had quite a ride in terms of high Volatility, a strong rebound phase from the SP500 since October 16 and swing from Correlation Risks not seen for awhile : the Correlation Risks Cycle is a lot more faster and violent than we get used to see and I think it will be that way for some time.
All that is just telling me to expect more volatility for the next two weeks.
Reaching a new high ever on the Mighty SP500 did help tremendously the Shares of Apple. But from here, it will be more difficult to achieve. So a few tailwinds that can face Apple Shares in the next few weeks...
It has been a few weeks that I mention the relatively low cost of Relative Volatility and options premiums:
Again, at the close of November 7, the 109 strike Straddle ( long call + long put ) closed at $1.93 for the November options. A quite cheap play indeed ( or depending on your view, long call or long put ).
More details on specific trading levels on the Daily tomorrow.
More explanation of the Correlation process below...
I started to analyze Apple shares in a complete different way using correlation with the sector ( Taking the XLK - Technology Select Sector SPDR as proxy ) and with the SP500 Index on the other side...
Three main observations emerge from the correlation approach:
1) Correlation between Apple Shares and XLK and SP500 are very often the
same - see chart below. It tend to peak at the same time and bottoming
at the same most of the time.
2) When correlation is high, the risk is a slippage in the price action of Apple
Shares - see chart below.
3) When correlation is low, usually a bullish price action is foreseen for Apple
Shares - see chart below.
October 26 Correlation Risks Increasing ?
I wrote a few times last week that the Correlation Risks were Increasing.
It is not in the Danger Zone yet when Correlation number with the
SP500 went below the 0.75 treshold level, but need close monitoring.
It did reach over 0.75 on Correlation with the SP500 on October 16;
Since then, it stayed above for 7 consecutive days. ( See chart below )
It reminds me of the same long correlation risk phase between May 23 and
June 11 2014 and the other phase of August 12 to August 27.
What happened next is a correction in Price of Apple Shares til June 24 ( 4.2% taking closing prices ) in the first case before resuming uptrend and in the second case - September 9, 5.15 price correction.
But this time, it should be a smaller correction as portfolio managers will take most corrections to pile up in Apple Shares...
So it is a huge risks that Apple Shares are facing for the next few sessions in terms of relative performance compare to the SP500.
Correlation factor with the SP500 is a lot more crucial to follow than with the XLK ETF.
So now, when we will see Correlation with the SP500 getting under 0.75, then Apple Shares will be at risk of underperforming SP500 as history suggest. ( See chart below ).
We had quite a ride in terms of high Volatility, a strong rebound phase from the SP500 since October 16 and swing from Correlation Risks not seen for awhile : the Correlation Risks Cycle is a lot more faster and violent than we get used to see and I think it will be that way for some time.
All that is just telling me to expect more volatility for the next two weeks.
I will keep you posted on the daily when the correlation risks will be triggered and uptade you on prices target.
The other factor I would like to tell you is about the PVT ( Price Volume Trend ) that is in a phase of divergence for Apple Shares - see second chart below - ellipses. What I have noticed, is that in previous peak prices of Apple Shares ( June 10, July 29 and September 2 ), we had in each case a stronger and higher PVT; with a highest price ever on October 24, PVT did not reach previous peak of September 2 then creating a divergence.
I will follow that because it tells me that the last run up was weaker than the previous peak prices - very surprising though...
October 20 - Pot Pourri
Take note that the chart below is not updated - technical issues
What we know IF history repeat itself;
Apple Shares Behavior Before Q4 ER
On Price of Apple Shares:
1) Peak price is the highest at the event: in our case, will be Oct 20 2014.
2) From the event plus 1 trading session, Price correction:
price fell on average of the previous 6 Years 1 day after the event by 1.4%.
On Relative Price ( RP ) of Apple Shares vs SP500:
1) RP is the highest at the event: in our case, will be Oct 20 2014.
2) From the event plus 1 trading session, Relative Price correction:
relative price fell on average of the previous 6 Years for the event by 0.8% 1 day Day after the event.
On Relative Volatility ( RV ) of Apple Shares:
1) Peak Relative Volatility is the highest on 4 Trading Days before the event: in our case, will be Oct 15 2014.
2) From the event plus 1 trading session, RV Collapse:
So RV fell on average of the previous 3 Years for the event by 18.7% 1 day Day after the event.
Option Market is pricing a $4.45 move:
Long Straddle ( Long Call and Long Put ) on October 24 options closing price on October 17 was $4.45
or 4.56% or market shift expected; so $97.67 : $93.22 to $102.12 range.
SP500 Futures did the dead cat bounce and are resuming downtrend...
So for the option players, do spreads trade and not outright play because premium will fall tomorrow...
It it less crucial to know at this point because of ER but Correlation Risks are near the Danger Zone ?
Correlation risk are near to be at play.
It did reach over 0.75 with the SP500 on October 16 but did not went below 0.75 yet...
August 28 Correlation Risks in the Danger Zone ?
Yesterday I wrote that the Correlation Risks were Increasing.
Today, it did reach the Danger Zone when Correlation number with the
SP500 went below the 0.75 treshold level.
Correlation risk are now at play and well into the danger zone.
It did reach over 0.75 with the SP500 on August 12 but went below 0.75 on
August 27 ( 0.65 - See chart below )
It reminds me of the same long correlation risk phase between May 23 and
June 11 2014. What happened next is a correction in Price of Apple Shares
til June 24.
So it is a huge risks that Apple Shares are facing for the next few sessions in terms of relative performance compare to the SP500.
Correlation factor with the SP500 is a lot more crucial to follow than with the XLK ETF.
So now, when we will see Correlation with the SP500 getting under 0.75, then Apple Shares will be at risk of underperforming SP500 as history suggest. ( See chart below ).
And on top of that, the potential scenario for the SP500 futures is a tiny correction this week ( We did break the 1998.5 level on SP500 Futures on August 27 ) and a consolidation phase for Apple Shares ( to $99.32 MAX for the next few sessions ) before resuming uptrend.
We had quite a ride in terms of low Volatility, a grinding phase from the SP500 and swing from Correlation Risks not seen for awhile : the Correlation Risks Cycle is a lot more faster and violent than we get used to see and I think it will be that way for some time.
All that is just telling me to expect more volatility for the next two weeks.
August 27 Correlation Risks Increasing ?
Correlation risk are now at play and well into the danger zone.
It did reach over 0.75 with the SP500 on August 12 and did stayed above
that level since. ( See chart below )
It reminds me of the same long correlation risk phase between May 23 and
June 11 2014. What happened next is a correction in Price of Apple Shares
til June 24.
So it is a huge risks that Apple Shares are facing for the next few sessions.
Correlation factor with the SP500 is a lot more crucial to follow than with the XLK ETF.
So now, when we will see Correlation with the SP500 getting under 0.75, then Apple Shares will be at risk of underperforming SP500 as history suggest. ( See chart below ).
And on top of that, the potential scenario for the SP500 futures is a tiny correction this week ( We need to break the 1998.5 level on SP500 Futures ) and a consolidation phase for Apple Shares ( to $99.32 for the next few sessions ) before resuming uptrend.
We had quite a ride in terms of low Volatility, a grinding phase from the SP500 and swing from Correlation Risks not seen for awhile : the Correlation Risks Cycle is a lot more faster and violent than we get used to see and I think it will be that way for some time.
All that is just telling me to expect more volatility for the next two weeks.
August 10 Correlation Risks Fading ?
We had quite a ride in terms of Volatility, correction from the SP500
and swing from Correlation Risks not seen for awhile : the Correlation Risks
Cycle is a lot more faster and violent than we get used to see and I think
it will be that way for some time.
2013 was a low grinding trading environment, 2014 will be a choppy and
volatile ride.
Correlation risks fell below the danger zone ( 0.52 ) on August 8.
It did reach over 0.75 with the SP500 on August 1 ( See chart below - Ellipses).
Last week I wrote that:
We have seen in the past that when correlation level with SP500 crosses back below .75, it does increase the slippage risks in the next few sessions for Apple Shares. The next two trading session will gives us the answer.
A Fast Cycle will add tremendously to an already Volatile price action for Apple Shares. A Delayed Cycle will Reduce Volatility and balance that Market Risk partially.
So we had a Delayed Cycle on Correlation Call and then Risks are Fading quickly.
Correlation Risks Fading, Average Relative Volatility, a nice correction in price; all the factors are there for a turnaround this week for Apple Shares.
I will update you on the daily with specific Correlation levels and Price Targets for Apple Shares tomorrow...
August 3 Fast Correlation Cycle ?
August 3 Fast Correlation Cycle ?
Having changed the Trading Environment for the Market as a whole since last
week bring also a new factor within our analysis: the Correlation Risks Cycle
is a lot more faster and violent than we get used to see.
Correlation risks are now at play and well into the danger zone ( 0.7546 ).
It did reach over 0.75 with the SP500 on August 1 ( See chart below ).
From here, two potential scenarios for Correlation risk :
1) A Fast Cycle: Correlation with the SP500 get under 0.75 within the next
two trading days and Apple Shares will be at risk of underperforming SP500 as history suggest ( See chart below - Ellipse July 11 to July 16 Fast Cycle ).
2) A delayed Risk: Correlation with the SP500 stay over 0.75 within the next several trading days and Apple Shares will be outperforming SP500 as history suggest ( See chart below - Ellipse May 23 to June 6 Delayed Cycle ).
We have seen in the past that when correlation level with SP500 crosses back below .75, it does increase the slippage risks in the next few sessions for Apple Shares. The next two trading session will gives us the answer.
A Fast Cycle will add tremendously to an already Volatile price action for Apple Shares. A Delayed Cycle will Reduce Volatility and balance that Market Risk partially.
I will update you on the daily with specific Correlation levels...
July 27 Correlation Risks in the Danger Zone ?
July 27 Correlation Risks in the Danger Zone ?
Correlation risk are now at play and well into the danger zone.
It did reach over 0.75 with the SP500 on July 24 and did came back below
that level on July 25. ( See chart below )
We have seen in the past that when correlation level with SP500 crosses
back below .75, it does increase the slippage risks in the next few sessions
for Apple Shares.
So now, when we have Correlation with the SP500 getting under 0.75, then
Apple Shares will be at risk of underperforming SP500 as history suggest. ( See chart below ).
Having Already Started a A New Counter Trend Phase ( See the Other Research ) that will balance that Correlation Risks, it does tell me that Volatility in Apple Shares will prevail.
I will update you on the daily with specific technical levels, having some data feed problems this morning...
Please have in mind that since that with that all new crowd ( retail players ), Apple Shares Behavior will be changed in two ways: I expect more Volatility in term of Price and Relative Volatility and price extreme ( slippage ) that in the past. So we will have to adjust accordingly. That will just add more trading opportunities but also associated with more risks.
July 13: Totally in DeCorrelation Again ?
We rarely see that. The Correlation between Apple Shares and the
SP500 is in a deep negative territory (-0.38) - so a DeCorrelation risk.
As history suggest, when we were previously in a corrective phase for Apple
Shares and then Correlation turns that negative, usually we see in the next
few sessions a consolidation / dead cat bounce emerge.
So now, when we have Negative Correlation with the SP500 getting under
-0.30 and when it crosses back that level, then Apple Shares are in a phase
of outperforming SP500 as history suggest. ( See chart below - ellipses ).
That behavior on Apple Shares, especially last Friday was option driven.
With ER results quite near, that tells me that Volatility will prevail.
As long as the SP500 futures U4 break the 1968 level, then I expect some Counter Trend flows that may come as a contrarian flows to minimize the Correlation risk....
Correlation factor with the SP500 is a lot more crucial to follow than with the XLK ETF.
Please have in mind that since that with that all new crowd ( retail players ), Apple Shares Behavior will be changed in two ways: I expect more Volatility in term of Price and Relative Volatility and price extreme ( slippage ) that in the past. So we will have to adjust accordingly. That will just add more trading opportunities but also associated with more risks.
July 6 Correlation Risks in the Danger Zone ?
July 6 : Correlation Risks in the Danger Zone ?
Correlation risk are now at play and well into the danger zone.
It did reach over 0.75 with the SP500 on July 2 and did not came back below
that level since ( See second chart below - ellipses )
We have seen in the past that when correlation level with SP500 crosses
back below .75, it does increase the slippage risks in the next few sessions
for Apple Shares.
Already last week we had the Consolidation phase, on top of that now the
Correlation Risks are at Play. So when we have Correlation with the SP500 getting under 0.75, then Apple Shares will are at risk of underperforming SP500 as history suggest. ( See chart below - ellipses ).
So it is a huge risks that Apple Shares are facing for the next few sessions.
Correlation factor with the SP500 is a lot more crucial to follow than with the XLK ETF.
As long as the SP500 futures U4 break the 1971 level, then I expect some Counter Trend flows that may come as a contrarian flows to minimize the Correlation risk.... IF SP500 continue to grind and we come back below 0.75 for the Correlation risk, then Apple Shares will be at maximum risk.
The best scenario for me is for Apple Shares is to have a tiny correction phase, testing the 20 Day Moving Average ( DMA ) now at $92.25 and rebounding from there. Breaking tha 20 DMA will be seen a very weak technicals and risk a gap down to the $90.75 level.
Please have in mind that since that with that all new crowd ( retail players ), Apple Shares Behavior will be changed in two ways: I expect more Volatility in term of Price and Relative Volatility and price extreme ( slippage ) that in the past. So we will have to adjust accordingly. That will just add more trading opportunities but also associated with more risks.
June 22 Totally in DeCorrelation
June 22: We rarely see that. The Correlation between Apple Shares and the
SP500 is in a deep negative territory (-0.41) - so a DeCorrelation risk.
As history suggest, when we were previously in a corrective phase for Apple
Shares and then Correlation turns that negative, usually we see in the next
few sessions a consolidation / dead cat bounce emerge.
So now, when we have Negative Correlation with the SP500 getting under
-0.30, then Apple Shares are in a phase of outperforming SP500 as history
suggest. ( See chart below - ellipse ).
That behavior on Apple Shares, especially last Friday was option driven.
The best scenario for me is for Apple Shares is to have a consolidation / dead cat bounce phase, testing the 20 Day Moving Average ( DMA ) now at $91.49 and see IF we are able to close above and then back into the consolidation channel ( $91.20 support and $92.50 as resistance )...
Correlation factor with the SP500 is a lot more crucial to follow than with the XLK ETF.
Please have in mind that since that with that all new crowd ( retail players ), Apple Shares Behavior will be changed in two ways: I expect more Volatility in term of Price and Relative Volatility and price extreme ( slippage ) that in the past. So we will have to adjust accordingly. That will just add more trading opportunities but also associated with more risks.
June 15 Correlation Risks in the Danger Zone ?
June 15: Correlation risk are now at play and well into the danger zone.
It did reach over 0.75 with the SP500 on May 27 and did came back below
that level on June 12. ( See second chart below )
We have seen in the past that when correlation level with SP500 crosses
back below .75, it does increase the slippage risks in the next few sessions
for Apple Shares.
Already last week we had the ET and Saloons Door Experiment, on top of
that now the Correlation Risks are at Play. So now, when we have
Correlation with the SP500 getting under 0.75, then Apple Shares will are at risk of underperforming SP500 as history suggest. ( See charts below ).
So it is a huge risks that Apple Shares are facing for the next few sessions.
Correlation factor with the SP500 is a lot more crucial to follow than with the XLK ETF.
And on top of that, the potential scenario for the SP500 futures U4 is a tiny correction this week ( I have 1908 in mind ). IF that level is broken, then I expect some Counter Trend flows...
The best scenario for me is for Apple Shares is to have a last tiny capitulation phase, testing the 20 Day Moving Average ( DMA ) now at $90.10 and rebounding from there. Breaking tha 20 DMA will be seen a very weak technicals and risk a gap down to the $88.93 level.
Please have in mind that since that with that all new crowd ( retail players ), Apple Shares Behavior will be changed in two ways: I expect more Volatility in term of Price and Relative Volatility and price extreme ( slippage ) that in the past. So we will have to adjust accordingly. That will just add more trading opportunities but also associated with more risks.
June 1 Correlation Risks Rising ?
June 1: Correlation risk are now at play and well into the danger zone.
It did reach over 0.75 with the SP500 on May 27 and did stayed above
that level since. ( See second chart below )
So it is a huge risks that Apple Shares are facing for the next few sessions.
Correlation factor with the SP500 is a lot more crucial to follow than with
the XLK ETF.
So now, when we will see Correlation with the SP500 getting under 0.75,
then Apple Shares will be at risk of underperforming SP500 as history suggest.
( See charts below ).
And on top of that, the potential scenario for the SP500 futures is a tiny
correction this week ( I have 1889 in mind ) and a consolidation phase for
Apple Shares ( $618 to $623 for the next few sessions ) before resuming
uptrend.
And getting near the split date, which should bring some new players and
potentially Icahn selling a portion of his shares next week.
All that is just telling me to expect more volatility for the next two weeks.
May 18 Correlation Risks at Play ?
May 18: Correlation risk are now at play well into the danger zone.
It did reach over 0.75 with the SP500 on May 15 and did not stayed above
that level since. ( See second chart below )
So it is a huge risks that Apple Shares are facing for the next sessions.
So now, on May 16, it got under 0.75 ( 0.46 exactly ), then Apple Shares will
be at risk of underperforming SP500 as history suggest.
( See charts below ).
The potential scenario is a range trade for the SP500 futures ( 1859 to 1882 )
and a consolidation phase for Apple Shares ( $591.70 to $600.50 for the next
session ) before resuming uptrend.
Price of Apple Shares vis-a-vis the market with risk on / risk off and then
correlation risks on / decorrelation must bring a new way of looking at
markets because some think we already started into a new bear trend.
That Counter Trend is a major factor behind the good behavior of Apple
Shares last week; this factor should not be there this week.
IF SO, we will have to think in terms of relative performance and not
shares price gains...
April 27 Correlation Risks Finally Abating ?
April 27: Finally, Correlation risk now are abating well below the danger zone.
It did reach over 0.75 with the SP500 on April 22 and did not stayed above
that level since. ( See charts below )
So it is a huge risks that Apple Shares are not facing for the next sessions.
So now, only getting under -0.75 and when it crosses back below that level,
then Apple Shares will have reach a short term top as history suggest.
( See charts below ).
So nothing to worry about til we reach that level. I will keep you posted
on the daily as usual.
The potential scenario is a violent Euphoria phase ( MAX $594.60? )
followed by a strong pullback to retest the last peak reached on December 5
at $575.14. This is the expectations of market participants ( not mine ).
Price of Apple Shares vis-a-vis the market with risk on / risk off and then
correlation risks on / decorrelelation must bring a new way of looking at
markets because some think we already started into a new bear trend.
That Counter Trend is a major factor behind the good behavior of Apple
Shares last week; that should be there again this week.
IF SO, we will have to think in terms of relative performance and not
shares price gains... Convictions will be shaken more often and we will
have to trade accordingly.
April 13 Correlation Risks Still at Crossroads?
April 13: Correlation risk now are within the danger zone. It did reach over
0.75 with the SP500 on April 7 and stayed above that level since.
( See charts below )
The next few sessions will be critical and I will update you with the daily.
So getting over 0.75 and when it crosses back below that level, then Apple
Shares are at risk of another huge slippage. That is the usual behavior.
But the very bad performance of the SP500 can change that behavior.
Also, the fact that we are near Earnings Release ( on April 23 ) can also
bring a rebalancing towards Apple Shares.
The potential scenario is a violent capitulation phase ( MAX $512.38? )
followed by a strong rebound ( dead cat bounce ) to retest the 50 DMA ( Day
Moving Average - now at $529.56 ). That will then clear the correlation risks
for Apple Shares. That is what I expect early this week.
Price of Apple Shares vis-a-vis the market with risk on / risk off and then
correlation risks on / decorrelelation must bring a new way of looking at
markets because some think we already started into a new bear trend.
Last Friday, Apple Shares followed the broad market.
IF SO, we will have to think in terms of relative performance and not
shares price gains... Convictions will be shaken more often and we will
have to trade accordingly.
April6: Correlation Risks at Crossroads?
April 6: Correlation risks are rising quite fast. Since reaching a bottom on
March 26, correlation risks have been grinding higher ( now 0.63 with SP500 ).
The critical level is over 0.75 with SP500.
Even is correlation risk with the XLK sector are over 0.75, it is not a concern
as long as the correlation with the SP500 does not get there too.
The next few sessions will be critical and I will update you with the daily.
Either we see a scenario like what happened on March 19, flirting just below
the critical level of 0.75 and finally abating slowly... In that case, Apple Shares
performed quite well. ( See charts below ).
Or, the other scenario, a nasty one ; getting over 0.75 and when it crosses
back below that level, then Apple Shares are at risk of another huge slippage.
May I remind you that since March 7, the SP500 is more in a range trade
then the bull scenario.
Price of Apple Shares vis-a-vis the market with risk on / risk off and then
correlation risks on / decorrelelation must bring a new way of looking at
markets because some think we already started into a new bear trend.
Last Friday, Apple Shares followed the broad market.
IF SO, we will have to think in terms of relative performance and not
shares price gains... Convictions will be shaken more often and we will
have to trade accordingly.
March 16 December 2013 Correlation Risks Scenario
March 16: I think with the uncertainties surrounding the global markets
( Ukraine, China ), that we will continue to have a see-saw markets
with high volatility and choppiness. The other factor that it will bring, is
I think it will accelerate the cycle of correlation to decorrelation like we
experienced ( in a more humble way ) in December 2013 ( see charts below ).
Price of Apple Shares vis-a-vis the market with risk on / risk off and then
correlation risks on / decorrelelation must bring a new way of looking at
markets because some think we already started into a new bear trend.
IF SO, we will have to think in terms of relative performance and not
shares price gains... Convictions will be shaken more often and we will
have to trade accordingly.
So at the beginning of last week, we started with high correlation risks
( over 0.75 with SP500 ) to fade quickly below that level on March 11.
Then it was the trigger for slippage into price action for Apple Shares
( It did close on March 11 at $536.09 and closed on March 14 at $524.69 ).
From now on, awaiting the next spike in correlation over 0.75 that should
be in the next 2 to 3 days ( near cycle like December 2013 ) and then back
with another risk of slippage in Apple Shares, especially if SP500 stabilize
or trade up... ( See charts below ).
March 9 Correlation Risks at Their Peak ?
March 9: The situation on the correlation factor changed very quickly from
February 28 were we had no correlation risks towards Last Friday s close
( March 7 ) with correlation factor with the SP500 spiking over 0.75.
( 0.80 exactly ).
I am giving more emphasis towards correlation factor with SP500 than
XLK - ( Technology Select Sector SPDR ) because there is some
autocorrelation with Apple Shares who are around 8% of that fund.
History tells us that reaching correlation over .75 on are one sign of a risk
of slippage in Apple Shares in the next few trading sessions.
Adding to that is the fact that we had already 3 days in a row last week
with correlation over 0.75 with the SP500 Index. So the correlation risk have
not been that high and this week it will be felt...
With the SP500 now breaking new high and bullish sentiment not receding,
Apple Shares are going into the next sessions with a tremendous risk of
underperforming. ( See charts below ).
March 6 Correlation Risks are Back ?
March 6: The situation on the correlation factor changed very quickly from
February 28 were we had no correlation risks towards yesterday s close
( March 5 ) with correlation factor spiking over 0.75.
History tells us that reaching correlation over .75 on are one sign of a risk
of slippage in Apple Shares in the next few trading sessions.
With the SP500 now breaking new high and bullish sentiment not receding,
Apple Shares are going into the next sessions with a tremendous risk of
underperforming.
( See charts below ).
March 2 No Correlation Risks ?
March 2: The situation on the correlation factor is really not the same as in
mid-February were reaching correlation over .75 on February 14 was one sign
of a risk of slippage in Apple Shares.
Now the risk is more balanced ( market risk ) and no correlation risk at this
stage. Usually, we start to see in that kind of set up, finally an outperformance
of Apple Shares compare to the Mighty SP500.
What is not the same this time than in the past is that the market is at its
top with long positions, low VIX and geo-political risks climbing. In that
kind of environmrnt, it will be a good diversification strategy for hedge
funds and portfolio managers to own Apple Shares vis-a-vis the market.
Here I must be clear: I expect an outperformance of Apple Shares but
Market Risk is a lot higher on SP500. We can see a correction in prices
for the market as a whole were Apple Shares hold quite well...
( See charts below ).
Feb 23 Decorrelation Expectations ?
On Feb 16 I wrote:
The reach of correlation over .75 on February 14 is one sign of a risk
of slippage in Apple Shares. ( Closed at $544.00 on February 14 and at
$524.42 on February 21 ).
Market completely ignore at this point ( February 14 ) this correlation risks
spike of over .75: It is a very a bad omen for Apple Shares.
But now, compare to last week, we have almost the complete reverse
situation. From a correlation standpoint of over .75 on Feb 14 with the Mighty
SP500 to only 0.05 on Feb 21 ( see second chart below ), we went from a
very correlated Apple stock to uncorrelated - a perfect set up for a potential
rebound in prices...
Now, the best scenario would be to have a few more sessions of decorrelation
to bring us at negative levels. Then we will be able to have very positive
expectations in terms of price for Apple Shares...See Charts Below
Feb 16: The reach of correlation over .75 on February 14 is one sign of a risk
of slippage in Apple Shares. ( Closed at $544.00 on Feb 14 )
Market completely ignore at this point this correlation risks spike of over .75:
It is a very a bad omen for Apple Shares: then Apple shares is really at risk of
another pullback... Each time that situation arise in the past , Apple shares
pullback between $10 to $15 in price. ( See charts below )
Feb 8: From a high correlation standpoint with the Mighty SP500 on Jan 22 (+0.83) was back
then a bad omen for Apple Shares to the next lowpoint on Feb 5 (-0.35) were it was a turning
point in terms of price action...
I still expect the market and a grinding pattern developping for Apple Shareslike in we had back
in October 2013. See charts below...
Now, we must wait the correlation factor grind back above 0.75:then Apple shares will be at risk
of another pullback...
Feb 6: As I wrote on Feb 1, I was expecting correlation trending down with the market and a
grinding pattern developping for Apple Shares like in October 2013.
Now, Apple Shares still a safe haven as a defensive plays for institutional investors at this time
for 2 reasons: not correlate with the entire market and low volatility after the ER released...
I do expect that pattern to continue for a few more sessions...See charts below...
Feb 1: Correlation starting to fall with XLK ETF ( at .75 ) but not as much with the SP500
( only .51 with a divergence ) remind me of the October 2013 period. Same kind of pattern;
risk of capitulation ( Can it be Jan 31 with a low of $493.55 ? ) followed by a bull phase. But that
bull phase was more of a grind than with runaway gaps...But I think this time, the timeframe will
be shorter to occur than Oct 2013. So I ll say we will see that pattern within a week...
See charts below...
Jan 31: Spike in correlation with XLK ETF ( over .75 ) but not as much with the SP500
( only .56 with a divergence ) remind me of the October 2013.Same kind of pattern; risk of
capitulation followed by a bull phase.But I think this time, the timeframe will be shorter than
Oct 2013.So I ll say we will see that pattern within a week...See charts below...
Jan 25: Market completely ignored the correlation risks spike of over .75 on Jan 22 was a bad
omen for Apple Shares... ( See charts below )
The surprise was that iCahn purchases that week. But even with that, we closed the week l
ower in price than on Jan 22. Now, we start to see decorrelation: the means to me that now we
are ready for the next bull phase. Stay tuned...
Jan17: The reach of correlation over .75 on Dec 27 was one sign of a risk of slippage in Apple Shares. Since then, we went from $560.09 to a close on Jan 3 at $540.98...
And another peak on Jan 6 at .83 tells me the risk of another downwave in Apple Shares within the next week ( Closing price on Jan 6 at $543.93 ).We did close on Jan 10 at $532.94.
Another Spike in correlation happened on Jan 17 but still below the .75 mark vs SP500. Apple shares are still at risk of slippage because of that.
We are getting quite near of a Capitulation Phase in the next few sessions according to correlation see charts below ) and then expect finally a rebound in Apple Shares.
