Yo, Pit Crazies,

One of the great reasons Mark and I are proponents of being conditional trader is that markets change, years change and trends change.

Stocks are fashionable one year and not the next.

A big theme in 2022 was multiple compression. Stocks that got a big boost in their earnings multiples came to earth.

That trend is likely to continue at least into the first quarter.

But based on the chart below, it’s a trend that needs to stop.

I’ll explain.

Big Cap Stocks Are Still Very Volatile

Note that Vol Man is bouncing on the highs and lows on the chart below of 90 day realized vol …

AAPL one-year chart with one-day candles. Vol Man is riding 90-day realized vol.

That means quarterly movement is still very high for the year and was trending up into the close of the year. 

Apple (Ticker: AAPL) is closing the year at lower prices and higher realized vols.  

Neither of those trends are good and show that the selling is over in the short term. As realized vol drops, AAPL stock price should hold up a bit but for now the last quarter was still too volatile.

I am expecting a tough start to the year until some of the bigger economic forces change.  AAPL is a good bellwether for that. In the meantime, multiple compression is still a real thing.

To Your Trading Success,

AG