Tech investors have become so enamored of Apple that Doug Kass thinks they're missing some pretty bearish signals.
“Merrill Lynch strategist Bob Farrell taught us in market rallies we have to be attentive when breadth narrows and divergences develops,” says CNBC ContributorDoug Kass, president of Seabreeze Partners.
And Kass thinks we’re seeing that now.
“We are seeing a market that is far too focused on a few names – most importantly Apple – it’s an NBA market – nothing but Apple."
Kass suggests that the fear of missing the next leg higher has all but blinded tech investors. And in the process, they’re missing the forest for the trees. Kass says investors should instead consider the following:
- Apple’s market cap is larger than Google & Microsoft combined
- Apple is more than twice as big as its key vendor rivals
- Apple is $100 billion larger than 17 other companies that make smart phones
Kass thinks none of this is healthy, let alone sustainable.
When asked how to trade the thesis, Kass says, “I would focus on the QQQ’s.” In other words, the Nasdaq could be ahead of itself.
Looking at the market broadly, the whole S&P could be challenged under this thesis.
Kass says bullish sentiment is just to prevalent period. And he points to the following:
- Surveys showing a substantial rise in bulls and decline in bears over the last couple weeks
- Hedge funds have increased net long exposure
- Individual investors are putting money into domestic equity funds
- Famed bear Nouriel Roubini is optimist on the market
All told, that would suggest the next big move should be lower.
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Trader disclosure: On Feb 13, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Terranova is long VRTS; Terranova is long LQD; Terranova is long MUB; Terranova is long IBM; Terranova is long EMC; Terranova is long AXP; Terranova is long AAPL; Terranova is long TRLG; Terranova is long JOY; Terranova is long SNDK; Terranova is long MCD; Terranova is long MA; Terranova is long OXY; Terranova is long SU; Terranova is long CNX; Terranova is long CSCO; Terranova is long SBUX; Terranova is long FXE; Terranova is long TBT; Nathan is long AAPL outs; Nathan is long BAC puts spread; Nathan is long DELL puts; Adami owns C; Adami owns GS; Adami owns MSFT; Adami owns AGU; Adami owns NUE; Adami owns INTC; Adami owns BTU; Nations is long SPY; Nations is long BAC; Nations is long C
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