The iParadox

Tyler Durden's picture

A oft-mentioned paradox in the markets the last few days has been the seeming strength in broad equity indices, even as the very core of most managers' holdings - AAPL - goes entirely pear-shaped. We suspect this chart will go a long way to solving the paradox. It appears a major aspect of the S&P 500 strength is unwinds of AAPL longs hedged against market shorts (as managers attempted to segregate AAPL's strength - trying to transform high beta in their alpha). AAPL's weight in the index and in manager's portfolios certainly provides enough ammunition for algos to see momentum and extend any real-money forced 'buying' in the index from this effect - and so we levitate. How much further can it go? It is unclear for sure; but the divergence will become more and more painful for those that have yet to unwind...



and in the short-term, its is absolutely clear that institutional sellers are active - once again, look at today's perfect short-term top at Friday's closing VWAP (red arrow) - often used as an anchor for market-making algos to judge performance of institutional block orders.


Chart: Bloomberg

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Jason T's picture

as if there is someone behind the curtail pulling strings.. the string holding apple was let go it appears.  

BalanceOrBust's picture

What this proves is that prices are entirely determined by liquidity in hedge funds and banks.

I sometimes wish that I could go to the the casino with an infinite bankroll and just keep betting on black.

Maxter's picture

Make sure you double your bet everytime you lose.

slaughterer's picture

Give the 140 white sharks swimming in this pool a hot rumor to buy, and AAPL will be over $600 before EOY.  Without it, we see arbitrage effects and unwind spillovers like the ZH finance nerd shows above.  There are symptoms of short squeeze potential in AAPL given the spurts it is showing today.  

Generational low at $520?  NO.

Going to $380?  NO.

$600 on catalysts?  Maybe.  

Need a sudden, surprise swan catalyst for AAPL.

Probem is, there are none. 


Slaughter, slaughter.  Chop off an arm here, a toe here.  

rsi1's picture

AAPL no longer the leader

LawsofPhysics's picture

APPL now a "leading" indicator?  who would have guessed it?  But I think not, show me the real innovation and samsung's market share/price?  Where's reggie?

samcontrol's picture

are you saying the market will continue up and apple down ?

It's the only stock where people can take profit.

I predict one more apple "mini" mania for CHristmas , and a retest of the highs, then it,s over ...a value trap for. ten years.

TruthInSunshine's picture

No, the take away is that the only reason the S&P and broader indices haven't been crashing is because those heavily in AAPL have been liquidating and have been forced to cover in other equities; consider AAPL's market cap, equivalent to roughly 20% of the Nadsaq.

If that's the case, it won't take nearly a year for the support to give way.

Couple this with both a significant degradation of global economic fundamentals and foundations, the inevitable hiking of tax rates that are specifically pegged to equity "investors" in major economies, and the extent of Italy's (then France's) true depression being revealed along with how massively China has been faking it, and you have a critical mass wipeout of the dozens of trillions of fiat (mostly "borrowed" from the future) that the Fed, PBOC, ECB, BOJ & BOE have directly or indirectly injected into banks and financial markets in order to set a floor.

samcontrol's picture

ok got it , bullish for another year.

slaughterer's picture

The problem with AAPL can be summarized in ONE word:



The trend is your friend's picture

Better odds of coming out ahead in the iCasino then the iS&P. 

DavidC's picture

And to think, there WAS a time when 'bad news = market down', 'good news = market up'...


SmoothCoolSmoke's picture

The reason why the markets do not go down seem endless.  How much could have been won on a bet, made 3 months ago, on SP 500 at 1420 with AAPL at 530.  F'n ridiculous.

ak_khanna's picture

The stock, commodity and currency exchanges have been reduced to gambling dens whereby the more powerful traders with deep pockets move the markets to maximize their own profits at the expense of the remaining not so powerful players. The big boys have enormous money power to move the markets in the direction which results in maximum profits for themselves. They effectively use the media to lure the other players in the market to a position where they would incur maximum loss.
The markets will fall only when the banksters have eliminated all the short positions and only they themselves have positioned themselves to profit when the market falls
When an unexpected world event catches the banksters with their pants down and the softwares they use to rig the markets go berserk beyond their control. 

helping_friendly_book's picture

They will have to wait until hell freezes over, or SPXU gpes to zero, before I close my short.

Fuck Bernanke!!!!!

The freefall will happen.

Just a matter of when. Then the Primary Dealers will be short and I'll, finally, cash in.

Until then I save my earnings to cash. I haven't made a trade all year. I'm just waiting for this, one, trade made over a year ago to go my way. 

I'll wait it out.

LawsofPhysics's picture

careful, you are still talking about "cashing out" in paper promises.  Show me the short mechanism that will pay out in physical gold or silver, then I will go all in.  When fraud is the status quo, possession becomes the law and all currencies tend to go to zero fairly quickly.  When the bank runs and the real crash comes, no one will be able to cash out of the electronic and paper market as the bank holidays and real capital controls will be quickly implemented at all levels and in all systems.

LawsofPhysics's picture

Even then, good luck trying to get those shorts to pay out when the underlying currency dies because the underlying confidence is gone because the fraud remains unprosecuted.

Funny, the bankers expecting to cash out in the same paper promises that they have been destroying in order to enrich themselves - a FAIL on a massive scale.

scatterbrains's picture

Russel 2000 kinda looks like she needs another hit off the crack pipe....

slaughterer's picture

Russel 2000 looks like it got its hit of crack and meth today.  

helping_friendly_book's picture

Apple is 4.5% of the market cap of the S&P 500! 



How can the S&P continue to climb when the biggest constituent is going down?

amadeusb4's picture

I think the article is suggesting that AAPL profit taking is then being reallocated into the S&P so the net effect on the index is zero, but algo's are picking up on the S&P buying and running up the index in the face of this reallocation.

DavyRoySixPack's picture

I know almost nothing about Apple. What a relief.


I do think that if interest ever do go up - things will cost more for the great unwashed and manipulated gold will do what it is told.

samcontrol's picture

big boys trade and make money.

Iam Yue2's picture

Does Russel Napier see a "once in a generation" opportunity to exit Apple?

Dr. Engali's picture

Just bought a new iPhone for my daughter for  $.01 Thank goodness for the subsidy.

hannah's picture

i will withhold judgement til i see reggie's latest aapl report with 400 charts and 1700 random appl links to apple articles....oh and at least 5 font sizes and styles and colors....

slaughterer's picture

Reggie learned to format financial analysis through graffiti operations.  

hannah's picture

i think reggie gets most of his garphic design help from that little dog in the search window on my pc....little dog or maybe the paperclip...?

Darth Mul's picture

I'll surely buy apple when it goes down a bit more - Wall Street doesn't really understand business models that involve R&D and the actual creation of a project. Apple will be just fine.


Samsung may be better, of course.  But I expect Apple has a 'phablet' ready, or which will be ready, to leap frog over the S3 and Note II.  I wish apple would get rid of syncing all together - can't figure out how to get the audiobook I downloaded to my phone over to my laptop without removing all the stuff I want on my phone from my phone.... biggest single needlessly bad thing about Apple/iPhone.  Also - splitting videos and itunes u and podcasts out from the ipod app... needless stupidty putting things in 4 places that could and should be in 1.

Second thought - fuck Apple. 


But Apple will be doing much, much better than Microsoft or Facebook before the zombies come, by George.



I also like Acer....



chancee's picture

Or someone is just buying the ES like they have been doing for the past 3 years whenever the market looks like its going to crater.

slaughterer's picture

ES is all Kevin Henry's Christmas gift for us.  

q99x2's picture

The longer AAPL pulls a Newtonian the more the FED has to buy up the S&P. That's a good thing for the bankers because they get to own all the companies stock with my mother's social security perscription drug medication. I was going to go back to work but now I'm changing my mind.

disabledvet's picture

Obviously the shorts can breathe again. Having said I think to deny the validity of the product ("I everything") is to deny the existence of Apple itself. Of course if there is something the current CEO wishes to...disgorge...well, I am sure there are many. A "regular Army" I imagine.

Aurora Ex Machina's picture

Does anyone seriously think it matters if Apple goes to $1 / share now? All they do is use their own Hedge Fund to do an off-the-books buy-back, take it private, and it's the 401 crowd who get burnt.

But that's assuming the old rules are still being played.


Too late in the game for that.

orangegeek's picture

NASDAQ100 and Apple correlate much better.  NASDAQ tends to technology.  SP500 is more broad based.