- In Trade Chatter
- Last Updated: 24 January 2013
- By LA Little
If you think about the market logically it follows that the health of the overall market is paramount on the strength or weakness of its individual parts. Since most indexes and sectors are based on some weighting system, the health of the highest weighted sectors and, drilling down farther, the health of the highest weighted stocks contributes greatly to the health of the overall market. Apple is a huge weighting in most everything representing a full 20+% of the NDX and a significant percentage of the S&P 500 and NASDAQ as a whole. It's sick. Now one stock is unlikely to bring a whole market to its knees but with this kind of importance it can certainly give it reason to pause and I suspect that is what we are about to witness. The market needs and excuse to sell off. Apple has provided it. I doubt it will look past that opportunity to do just that - sell back down some. If it does, it really will be signalling some serious strength.
Looking at the broader picture, the market continues to look pretty good. For the most part, earnings have been bought - not sold. The central banks are pouring money into the system faster than a gushing broken faucet. We see a lot of rhetoric from developing nations about developed nations weakening their currencies but little has come of it. The race to zero continues.
How the markets fare near term will tell us a lot about how they will far over the next few weeks and months so today should be quite instructive.