Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
Yesterday was a strange session in that breadth was relatively weak outside of financials and airlines but the market indexes held in quite well. In fact of the top 40 components in the S&P 500, only 10 were positive yesterday (with 30 down!) but the index held in flat. A good part of that can be explained in the fact that Apple (AAPL) is making “one of those runs”. As the top weighted stock in the S&P 500 (4%ish) and NASDAQ (approaching 10%), Apple becomes more influential by the quarter.
While not quite as jaw dropping as the move from February of April of this year – when the stock made a move from the mid $400s to mid $600s – the stock has put in quite a move in advance of the product launch of the new iPhone and completely shook off a rare earnings miss. While the RSI has begun to reach overbought status it stayed that way for MONTHS last time around so not something to wave a sign of overheating. However, it is in one of those rare spots where the stock is above the upper bollinger band; the last time this happened was early July – the stock tracked sideways for a few days before faltering… however that was in a herky jerky market whereas we are now in a more stable environment. During its huge run early this year it was above the upper bollinger band only a few times and that usually led to at best sideways action for 3-4 days while it consolidated a bit. In the premarket, the stock is up another 0.9% to over $670 so the rubber band is being pushed to an extreme now in the short run.
Apple also overtook Microsoft’s late 1999 valuation for all time highest market cap at $624B (v $620B). While not inflation adjusted, it is an impressive feat. Number 2 company, Exxon Mobile (XOM), is some $200B+ behind Apple now. This is definitely one of the stocks for the ages.
As for the market it continues to act much better. We are not seeing any dramatic selloffs, and while the action is very quiet and volumes very low the major indexes mostly are marking time and consolidating any advances with sideways action. Day by day we see a rotation into most groups which keeps the indexes up even as individual sectors consolidate gains – i.e. semis and commodities which were the leaders 2-3 weeks ago, now have rested for 5-6 sessions. Outside of utilities and some parts of healthcare (both defensive) there is solid stabilization. While the market can be hit with a correction at any point, the nature of the action has changed significantly from what was seen April – July. And with Apple being such an influential force the indexes will have a hard time dropping in a sustained manner unless Apple gives up the ghost – we saw that in April 2012 as there was a marked weakness under the surface of the market while the major indexes held up.
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Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
