AAPL and Gold: Still all about Bubble Psychology

Apple and GDX, the ETF for gold mining stocks have very little in common–or so it would seem. One is a major technology stock, the other, a leveraged play on precious metals. Apple has tangible value, which at some price point will matter; Precious metals have whatever value we assign to them–the ultimate greater fool trade.

But the chart below shows a striking similarity. Both have been highly correlated to the downside in an overall up market.

Why? A tale of two bubbles. Both were the objects of excessive enthusiasm. This enthusiasm is now unwinding. My guess is that AAPL is close to finding a bottom. Precious metals–where there is no tangible anchor–look set to go much, much further.

The other interesting observation is the evolution of the rolling correlation between AAPL and the SPX. One thing to watch for is this correlation picking back up–implying the idiosyncratic component of the AAPL unwind is mostly behind us.