Market Overview

Which Way Wednesday – AAPL's Drag Too Much For Nasdaq to Overcome


What is wrong with AAPL?

After a great recovery off a dive to $505 in mid-November, they bumped up against the 200 dma at $596 and have been harshly rejected – already pulling back $30 (5%) to $566.  There has been no news – certainly no bad news – to cause this, just as there wasn't much news to cause the original drop (which we bought into).  As noted yesterday, AAPL is a big part of our $25,000 Portfolio and we even have an AAPL Money Portfolio and, although we are hedged – we're still expecting them to get back over $600 by Christmas.  

Without AAPL, the Nasdaq is toast, as it's roughly 20% of that index – hence our failure to get back over 3,000 on the Nasdaq but, when a stock has that much control over an index – perhaps the simple answer is that it's just being manipulated by Fund managers in order to manipulate the indices it's over-weight in.  That's why hedge fund managers like Paul Schatz of Heritage Capital can make outrageous calls like AAPL will be a $400-500 stock.  Why?  Well, he's a bit vague on that – it seems to have something to do with the Fiscal Cliff and the broad economy and not much to do with the fact that they make $50 a share and have $170Bn in cash on the books and that $400-500 would be a ridiculously low value.  

What does a guy like Shatz have to gain from pushing AAPL lower?  Well – if the Nasdaq follows AAPL down, then there's a whole index full of stocks that get dragged down with it and offer up attractive buying opportunities – for no other reason than one stock in the index caused a lot of damage.  That allows fund managers to allocate capital to the Nasdaq, knowing that eventually either the index will de-couple from AAPL or that AAPL will recover to a more normal value and bring the entire index with it.  

As you can see from the chart above, AMZN is humming along as is GRPN and GOOG, who are about to cross back over their own 50 dma at $704.  While certainly not in the same end of the tech business, it would be strange to see GOOG doing so well while AAPL is doing so poorly.  That's why we…
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