Despite a positive revision for third quarter Gross Domestic Product the market was unable to hold its highs of the day set during the first 30 minutes of trading. Lower gas prices did not help consumer confidence as the index slipped from last month’s reading. The broader market closed lower with the NASDAQ 100 and Composite closing with minimal gains. Leading to the downside was the S&P 500 losing only 12 basis points on the day. More notably was the stalling action we saw with the market along with AAPL. It is hard not to expect some stalling action after this incredible run up. If we do see this market roll over what kind of action will we see? Stay tuned. In the meantime, we continue to obey our process and operate within this existing uptrend.
AAPL has been on a tear as of late. The stock has moved more than 20% since its 10/15 low giving a huge boost to the NASDAQ 100 and Composite indexes. However, today was the first real blemish we have seen since the 10/15 low. Volume was above average on the day for the stock and after hitting another all-time high we saw sellers take advantage. Even news headlines as the stock surpassed $700 billion in market capitalization. The good news is the stock is still holding onto its 10 day moving average and both its 50 day and 200 day continue to trend higher. How the stock acts around the 10 day should be closely watched. Until then, while the stock weighed on the indexes today it certainly gave a huge boost since its 10/15 low.
There are quite a few people now coming out and screaming the market is overbought and we need another correction. We have heard this story before. An interesting thing to keep in mind is the Russell 2000 is the only index that has yet to make a new high in the third quarter while the S&P 500, Dow, and NASDAQ have all made new highs for the year. Small caps have been the forgotten child and perhaps it may have its day while the other major indexes consolidate these gains? If hedge fund managers are truly going to chase performance it is much easier pushing a small cap name higher than a large cap name. Price will be our indicator and it is whether or not you control your risk and jump on board will be the determining factor on whether or not you succeed. Stick with the process.
Tomorrow should be a light day. A major storm is set to cause havoc on the east coast so you can imagine many will simply coast into the Thanksgiving Day holiday. We continue to see individual names act well and continue to have new signals despite these overbought conditions. As long as we avoid major distribution and leading names hold up we will continue to stick with this trend.
