My etrade account provides me interesting news on Apple but it’s impossible to share outside of the app.
3 Articles on Apple.
Bears of May have come to play
12:01 AM ET 5/1/12 | Marketwatch
NEW YORK (MarketWatch) — I won’t bore you with the nitty gritty of the old saw, “sell in May and go away.” Basically, it is a quick way to remember that the summer half of the year is not often kind to investors.
With a year’s worth of gains already logged in the first quarter and technical deterioration across the board it does look like the bears are poised to take control.
Stocks logged one of their best first quarters on record this year but the fun ended when the Federal Reserve took their T-bird away. By hinting that it would no longer flood the market with cheap money — a new round of quantitative easing — it gave the market’s natural forces a chance to reassert themselves. And they did.
As last month ended, major market indexes had broken down below respective rising trendlines and smaller capitalization indexes were below 50-day moving averages. The bears were back.
The question is whether May will see downside follow through and the evidence suggests that it will. The tendency of the market to struggle between May and October means the bulls are fighting a long established seasonal battle from a disadvantage.
The biggest change was found in the Nasdaq where technology issues did a rather abrupt about face. A chart of the index shows a trendline drawn from the November low, excluding one data point in December, was soundly broken to the downside last month . (See chart 1)
As mentioned earlier, the 50-day average was also broken to the downside. And even more importantly, the relative performance of the Nasdaq (COMP) vs. the broad market as represented by the Standard & Poor’s 500 (SPX) also took a turn for the worse.
This is significant because the Nasdaq and the tech sector was one of the engines driving the rally all year. The loss of leadership without another group stepping in to take over is not a good sign for the market.
The question remains, “what do we do about it?” For the average investor, the answer is not going to be a surprise: cash and income.
Taking a little off the table to reduce risk is always a good idea in troubled times. Economic problems in Europe have returned to the front pages. Superstar stocks such as Apple Inc. (AAPL) and Priceline.com (PCLN) have run into serious trouble on the charts. And again, May is the start of the summertime blues for the market.
The other part of the plan is to use big dividend yields as a cushion against market weakness. The bond market does not offer much help here with the benchmark U.S. Treasury note yielding about 2% and money market funds yielding virtually nothing after taxes.
Fortunately, there are stocks with more generous yields, at least more generous relative to other choices. One sector where 4% yields are common is utilities. While the business model has changed from simple power generation to a more diversified mix, relatively high dividend payouts are still common.
Look for stocks that have stable charts and supporting technicals that lean to the bullish side. For example, Hawaiian Electric Industries (HE) sports a mild corrective decline in 2012 within an overall rising trend from a major 2009 low. (See chart 2)
It is above both its key 50- and 200-day moving averages and in early April the bears tried. but failed, to take it down. A false breakdown below support as seen in the chart led to an upside breakout a few weeks later. With a nice 4.8% dividend yield, this is a good place to hide from the storm.
There are other areas of the market offering big dividends but stable charts are a bit problematic. Some have already rallied a good deal and show signs of tiring. Others are actually in decline and capital losses can overwhelm a good dividend.
The bottom line is that the market is entering the time of year where, to misquote Shakespeare, discretion is the better part of valor. Capital preservation is more important now than capital growth.
Michael Kahn writes the Getting Technical column for Barron’s Online , which analyzes sectors and markets twice a week. Sign up for a free technical analysis chart of the day at QuickTakesPro .
Has Apple become the market?
12:01 AM ET 5/1/12 | Marketwatch
I’m not smart. I try to observe. Millions saw the Apple fall but Newton was one who asked, ‘Why?’ — Bernard Baruch, Legendary Investor
PLAYA DEL REY, Calif. (MarketWatch) — While Sir Isaac Newton was able to achieve a moment of scientific insight regarding the phenomenon of gravity through his visceral observation of the behavior of apples falling from a tree, these days one seeks slightly different insight into the state of today’s stock market by observing the role of Apple, Inc. in the current environment.
What is observable in this instance is that the direction of Apple stock has had an increasingly greater correlation to the Nasdaq 100 Index (NDX) and by inference, the Nasdaq Composite Index (COMP).
Today, Apple (AAPL) represents about 17% of the Nasdaq 100, but its effect on the markets seems to have an even greater impact on the direction of the Nasdaq 100. Since major market indices correlate to a high degree, the “Apple effect,” in turn, has a significant influence on the other major market indices and raises the question, “Has Apple become the market?”
Exactly how big is Apple, and how has its popularity as a mainstay of institutional portfolios affected its influence on the overall market?
Consider that today, Apple turns over its float every 50 days, while a mere three months ago the trading velocity of Apple was only half that, as it turned its float over every 100 days. When we speak of velocity, we mean the number of shares traded relative to the stock’s float. Apple has a float of 923 million shares and trades 26,086,000 shares a day on average as measured by the 50-day moving average of daily trading volume. This adds up to 1,304,300,000 shares traded over the last 50 days, well in excess of Apple’s 932,000,000 share float. That is an astounding number of shares, even for Apple, and a tremendous amount in terms of dollar value.
When you talk about Apple, you are talking about a true “big stock,” and this much money moving into and out of Apple, mainly as a result of the activity of institutional investors — mutual funds, hedge funds, pension funds, etc. — increases the correlative nature of Apple to the overall markets, and thus the overall risk in being exposed to such an environment.
Apple has been the key leading stock in the current market environment, with mutual funds alone owning about 37% of the stock — over 366 million shares. When funds start to pile out of an over-owned stock, it can create a landslide effect, though it could be argued that 37% is not at extreme levels.
However, according to the most recent data, big funds like the Fidelity ContraFund or the T. Rowe Price Growth Stock Fund now own positions in Apple that exceed 10% of their respective funds’ total portfolio values. This is something to take note of, since this implies that Apple has grown to become a truly “over-sized” position within institutional portfolios.
This, in turn, makes the stock susceptible to institutional investors who are starting to take profits in the stock on the basis of its huge size as a component in their portfolios. The fate of Apple, given its influence on the current market environment, has an exacerbated effect, and any tilting of institutional portfolios away from Apple as it becomes perhaps too large of a component in their respective portfolios will have a correlated effect on the market as a whole.
Perhaps the greater risk is in markets that are more highly correlative than ever, and this current “one-stock” market is something that is a new circumstance. Thus, Apple’s fate is, to a large extent, representative of the fate of the market, and its ability to please or disappoint investors with new products and new growth can on its own be a catalyst for a new market up leg if viewed positively, or a catalyst for a market correction should it be viewed negatively. As well, Apple’s action can be used as a “mask” for institutional distribution given its correlation to the major market indices.
Another twist to Apple’s huge influence on the Nasdaq-based indices, and the market as a whole, is that by holding up or supporting Apple stock, institutional investors can stabilize the general market indices during any correction as they sell off other holdings and reduce their exposure to the current market environment. This provides some cover, as institutional investors can count on late-comers to Apple stock seeking to get in on any significant pullback to help provide support for the stock and hence the general market. Thus we find it useful to consider Apple’s action on any given day relative to the general market in order to glean clues about what is going on under the surface.
In our view, the main aspects of Apple’s influence are twofold, and that is that one, if the stock is now a huge influence in a “one stock market” and institutional investors are loaded up on the stock, how then can we anticipate the direction of the general market based on Apple’s behavior? And two, what clues is it offering in terms of helping us decipher what institutional investors, the true drivers of any market trend, are doing with their portfolios?
For now our conclusion is that as Apple goes, so goes the market, and investors would be wise to consider Apple as a ready barometer for this current market environment as we move into the third year of a bull market that started off the March 2009 lows. Indeed, two apples that changed the world — Newton’s apple and Jobs’ Apple.
Gil Morales and Dr. Chris Kacher are both principals and managing directors of MoKa Investors LLC and Virtue of Selfish Investing, LLC.
Apple shares retreat, close April in the red
4:20 PM ET 4/30/12 | Marketwatch
SAN FRANCISCO (MarketWatch) — Apple Inc. shares on Monday fell by $19.02, or more than 3%, to close at $583.98. It was the third-straight day of losses for Apple following what had been big gains following the company’s upbeat quarterly results. For the month of April, Apple’s shares fell 2.6%.
Apple has been volatile over the last 5 days, since the earnings report last Tuesday. This pullback could have resulted in decent short term investments if I had taken my brother’s advice to purchase deep in-the-money calls. However, the general indication is that Apple stock is on the decline for the month of April / May 2012. What is a small retail investor like me to do???
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