My stock market crystal ball is pretty murky right now. In fact, it’s usually pretty murky. It’s only at the turning points where all the data points line up to signal a reversal that it gets clear. So maybe that means the market’s uptrend will continue until the ball fills up with bearish indicators. What’s murking it up right is this: plenty of indicators are telling me to be cautious on the stock market but I’m bullish on Apple. Because Apple makes up such a large chunk of the stock market these two hypotheses are probably mutually exclusive. If you’re bearish stocks you can’t be bullish Apple.
Unless, of course, you’re playing a pairs-type of trade: you could buy Apple and short the broader market simply betting that Apple will outperform. This may be a decent trade because if the market is topping here chances are Apple, being already undervalued, would outperform by losing less. If stocks continue higher they will be battling persistent overbought conditions. Apple, in contrast, is oversold and thus likely to outperform on the upside if only from the rubber band effect. Still, it’s hard for me to reconcile my bullish stance on Apple with my bearish stance on stocks.
News that insiders are aggressively selling shares at a pace not seen in several years adds to my bearish leanings. This is the smartest of the smart money and I’ve followed it my entire career. Insider buying is much more predictive than selling but I still take notice when the guys running the ship are looking for lifeboats.
Then again you have one of the foremost valuation experts in the world validating my research in telling us there’s a 90% chance Apple is undervalued. If that’s really the case then, as I’ve said before, the best thing Tim Cook can do with that cash pile is buyback as much stock as he can get his hands on under $500. The stock, in fact, bounced intraday today on rumors the company was accelerating their current buyback program before settling back to flat for the day.
But if you take a look at the chart the stock price has setup a resistance level right at that DeMark risk level I first noted a week or two ago. If it can get back above that line then the gap should be filled back to $510 or so.
And I just don’t see how that could happen and the market decline at the same time. I guess it’s possible. Anything’s possible. But it’s not probable at all. And if Apple is the only thing keeping me from turning more bearish then maybe it’s just time to follow the smart money and throw in the towel on the stock market in the short term. Then again, maybe Apple rips higher and takes the market with it. It feels about fifty-fifty right now.