Stock Market Update, Thoughts on Apple and Facebook, and “Pop Icon” Stocks
The S&P 500 has continued its rise upward in a steady and orderly fashion. This is a good sign that long-term investors are reallocating their portfolios back into equities. I am currently seeing few signs of the volatility that accompanies short-term market swings.
In addition, market technicians are enjoying a successful Golden Cross buy signal — another good sign for a multi-month market rally.
However, the equity markets are in an area of resistance. I expect the S&P 500 to fully break through this area and continue higher — but this is an area where we may see some profit taking AND some bargain hunting, thus increasing volatility short term.
ARTAIS Seasonal Model
In the seasonal model within the ARTAIS Fund, energy (“XLE”) was purchased at the beginning of February — replacing our technology ETF. XLE looks to continue trading upward as the ETF is trading above its 200-day moving average and has also given us a Golden Cross buy signal.
In addition, the cold snap in Europe has increased the demand for natural gas and heating oil.
Apple’s stock price
I do have one concern, and that is Apple’s stock. Apple is starting to show signs of “irrational exuberance”. The stock has entered a parabolic rise to trade above $500 a share (a 25% gain in 2012 alone), giving Apple a market cap larger than not only Exxon Mobile, but larger than Microsoft and Google combined. (Apple is also now worth more than 84% of the worlds’ countries.)
Pop Icon Stocks
Apple’s valuation has put it in a category I call “pop icon” stocks. Remember Qualcomm and Nokia in the late 90’s? Investors bought those stocks regardless of valuations as everyone owned a Nokia candy bar style phone. The same goes for Microsoft and Dell. In the 80’s, the market loved stores like Circuit City. And before that, Atari was all the rage. Most of these companies are still around today, but they trade at a fraction of their value back in their glory days.
And now, we have another “pop icon” company coming: Facebook. Will Apple “investors” start to shift their attention to Facebook’s spring IPO? Only time will tell, but for now, Apple has a big target on its back and investors should be cautious.
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