A gravestone doji is forming on the log-scale quarterly chart of the ratio of #AAPL and the risk-free asset (a 10-year U.S. Treasury bond).
This gravestone doji is forming right at the +2 standard deviation of the log-linear regression channel formed over the entire history of this ratio.
From a conceptual standpoint, what this chart indicates is that there's far too much optimism in the market about Apple's stock for the yields on the 10-year Treasury to be as high as they are.
Indeed, earlier this year, there was more fear in the market about a default on U.S. Treasurys than a default on Apple's bonds. This should never happen.
A private company, no matter how great its business model, does not have the power to create money, as does the federal government. Therefore, no corporation's bonds should be perceived as safer than a U.S. Treasury bond. Yet, this is effectively what this chart is illustrating is occurring right now. In so much as this ratio has reached its highest standard deviation from the mean ever, the market is far too optimistic about Apple's stock price when there's so much fear about Treasury bonds (and the U.S. Treasury's ability to repay its debts).
Since the U.S. Treasury bond underpins the global financial system by serving as the (theoretically) risk-free asset, there's never an instance whereby extreme volatility on Treasury bond yields won't eventually transmute into increased volatility for riskier assets, including stocks.
Very rarely do you see a higher timeframe chart this extremely over-extended on a log scale. A chart like this is something one would expect to see at the end of a supercycle because a reversal on this timeframe could last for many years. While it's certainly very possible that Apple's nominal stock price may continue to reach new ATHs, this chart is as worrying as a chart gets from a long-term perspective.
I'm worried about the many investors getting trapped at this supercycle high. Too many people believe that the central bank has achieved a soft landing and that the #Fed will cut rates. Too many market participants are wrongly assuming that a return to monetary easing will cause tech stocks to balloon in price again, as happened in 2020-21.
The coming recession will be much different. This time around, when the Fed cuts rates, inflation will quickly resurge causing central bank monetary policy to enter a period of whipsaw (where rates are cut and hiked erratically due to stagflation, similar to what happened in the 1970s/80s).
Although the Fed will indeed begin increasing the money supply dramatically in 2024 (it actually already started to do this), be cautious in assuming that this money will flow directly into tech stocks. Instead, the newly created fiat currency will increasingly flow into commodities as they continue to take up an increasing share of the total money supply. Commodities will take up more of the money supply because of rising conflict, deglobalization, economic protectionism, climate change/the effects of a transition to sustainability, and aging and less productive global demographics.
I hope that time proves me wrong because if I'm right, a lot of people are going to be very disappointed about Apple's real performance in the years ahead.
#AAPL / #Apple / #QQQ / #Nasdaq