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Courtesy of Scott Martindale, Senior Managing Director, Sabrient
Technology and Materials have been the major drag on the market this week, through Wednesday. Surprisingly, Financials and Energy have held up pretty well. It’s tough for the Technology sector, the S&P 500, and the Nasdaq to perform when the biggest market-cap company–Apple (AAPL)–misses estimates for the first time in forever, I think. Or was it 2004
Well in any case, seven years seems like forever. AAPL’s 6% slide on Wednesday allowed Exxon Mobil (XOM) to overtake it as the largest market cap company. iPhone sales of 17.1 million units missed analysts’ consensus estimates of 19.8 million units by a wide margin, and their iPad sales of 11.1 million units fell short of the 11.7 million expected. Given that Technology represents 17.1% of the S&P 500 (far outdistancing second place Healthcare’s 13.2% share), and given that AAPL is 62% larger than second place Tech firm Microsoft (MSFT), the S&P 500 and Nasdaq didn’t stand a chance of staying positive on Wednesday–despite strong reports from Yahoo (YHOO) and Intel (INTC). Still, Sabrient’s quant models continue to like Apple’s profile quite a lot.
The SPY closed Wednesday at 121.13, which is just below the resistance line of the 10-week trading channel between 112 and 122. Price has been consolidating at this level since Friday, and investors are seeking a catalyst to break through resistance at the top of the trading range. Also adding resistance is the falling 100-day simple moving average just above, and beyond that will be even stiffer resistance at the 200-day, which has flattened at around 128. RSI, MACD, and Slow Stochastic are all rolling over, but this may all be just a part of the price consolidation at resistance.
The non-confirmation of the bearish breakdown at the beginning of the month was a good sign. Now we need enough investor conviction to support a confirmed bullish breakout. My guess is that the breakout will happen.
The market certainly looks to Apple for leadership, but despite Apple’s sudden weakness, I remain optimistic. Yes, I acknowledge the unresolved European debt crisis, the depressed housing market, mixed economic reports (in the U.S. and globally), and the acrid air created by our glorious politicians. But I also see increasing consumer spending, an improved trade…
