Pop the corks – Apple just made a new high!

Investors’ love affair with Apple has not dimmed over the past few months. Heck no – in fact, their ardour has burst into flames with the posting of a new all-time high today at the $137 level, just surpassing the April 2015 high of $136.

And by sheer coincidence (or is it?), Bloomberg has an article today pointing out the sad faces down in the Wall Street offices of the big money managers.  Apparently, funds are way underweight this holding as stock pickers have shunned Apple for more ‘adventurous’ companies.

I do recommend you read this article because it contains some juicy data points – and investment lessons.  For instance, one study has found that after tracking returns of 26,000 shares from 1926 to 2015, less than 4% (1 in 25) of them were responsible for all of the $32 trillion in wealth generated by US equities in the period!  Isn’t that remarkable?

And of those, only 86 (0.3%) of them generated half of the returns with Apple accounting for 2%.

So, if you were a stock picker tasked with generating half to the total wealth to come, you would need to find one share in the 0.3% of shares out there.  That is odds of 1 in 300!  Throwing a dart at the stock pages of the Wall Street Journal (a practice I confess to did perform many years ago), and you would stand a chance of 1 in 300 of picking a good winner.  I can get better odds at the racetrack!  And it’s over a lot quicker.

That, dear reader, is why not many stock pickers beat the indexes – and why money is cascading out of mutual funds, hedge funds and into index funds and ETFs where the 2/20 rule is absent.

Investors have realised that with an index, you get shares like Apple and Amazon and all the other biggies. With managed funds, you may not, or they may be underweight.

And another titbit from the article:  Apple’s increase in market cap this month is $81 billion. while the increase in market cap from the bottom 400 of the 500 issues in the S&P 500 is only 19 billion!

Does this sound a little excessive, granted that Apple is almost a religion to some?  It certainly does to me – and the month is only 23 days old and the index continues  to rocket up.

So here is the weekly chart showing my Elliott wave labels:

As shown my the green bars, we are in the final wave 5 of big wave B.  The implication is clear – when this wave terminates, we shall see big wave C down starting.  The fact that wave B is in new high ground validates this forecast.

Here is the daily

The purple B wave has this A-B-C feel and we are in the green wave 3 of purple wave C of red wave B.

Apple has been one of the diminishing band of leaders of the pack in recent times.  In fact, just yesterday, while the Dow was storming into new all-time highs above 20,700, there were more losers than winners on the NYSE on the day!  The advance/decline line has been trending down while the index has powered ahead, lead by this ever-diminishing leader pack.  That is not the sign of a healthy market.

This is the hallmark of a top approaching of some size.

The bottom line?  Apple’s rally days are numbered.  To mirror the Dow and S&P, I expect a decline in a fourth wave and then perhaps a rally to a new high and then a collapse as the big C wave gets under way.