Is it really all about Apple?

Flip to a website, news channel or newspaper and the headlines were full of Apple talk. No that is not a new gossip show, it is Wall Street at its best in the world of media and social media. Yes, Apple did launch new products, or should I say old software in a new package called iPhone 6 and 6 plus (they stole the name┬áfrom the over-sized clothing sector at the mall). They included an Apple watch just for good measure and then the ranting and praising began. The stock made swings from $103 on the top side to $96 on the low side. You can see on the chart the wide swing in the final bar representing today. It is important to note that despite the volatility intraday the chart remains in an uptrend, but there is renewed volatility in the chart and the outlook. Set your stops according to the risk you are willing to accept in the stock going forward. The question when it is all said and done is simple, will it really make a difference to the stock price, earnings and future growth of the company? Jury is still out on the answer, but it will drive sales initially is the consensus. The broader question is what does it say about the overall market outlook? I don’t take Apple currently as┬áa barometer for the broad market indexes, but only a reaction to the days news. Below are some issues that could have more to do with where the market is going short term.

AAPL

 

The Russell 2000 Small Cap index is another challenge currently for the broad markets to deal with and watch going forward. iShares Russell 2000 index ETF (IWM) tested the $115 level of support again and a break would be our exit point on short term trades we executed off the August 7th low reversal. The last five days of trading have not been the best looking for the growth index, but we will let this play out accordingly. Putting pressure on the index today was biotech, regional banks and technology. If we break lower I would take that as a negative sign for the index and the broader markets moving forward.

The S&P 500 index has not had a loss of more than 0.5% for the last twelve days and today broke that streak with a loss of 0.65% and a test of support at the 1985 mark. This is the closing high in July and puts the sellers back in control of the index for the day. But, we all know how fickle the sellers have been. Trends are still all intact on the upside, but this could be a shot across the bow so to speak. Below is a look at the scatter chart of the ten sectors making up the S&P 500 index. As you can see at the end of the chart there was some selling on the day and a rounding top in the index (bold white line). Telecom (-1.2%), utilities (-1.2%), financials (-1%), consumer services (-1%) and basic materials (-0.8%) with the index down 0.65% for the day. Scanning the index we find it was not life threatening to the trend and the selling may bring the buyers back to the table. At the bottom of the chart you can see energy is the weakest link of the index as crude oil continues to put downside pressure on the sector. Watching how this all unfold and willing to take profit and let the downside unfold if that is the case. For now we watch and remain patient.

SP500Scatter

The last point of interest on the day came from McDonald’s (MCD). Looking at the weekly chart support was at the $93.20 level and we took that out on more selling today. Same-store sales were the reason for the decline on the day. That puts $86.75 as the next support level, but the damage was done to the stock is worth note as you consider the impact of the stock to the broad indexes. The spending decline among Americans is part of the problem for Big Macs, but add in Russia closing the largest store in Moscow and the impact┬áto┬áspending in the country overall. China has meat supply issues impacting that countries sales as well. This is still a demand issue across the board. A shift if eating habits, spending habits and perception are hurting the performance of the stock. The downside is definitely in play for the stock and it will be worthwhile to compare it across the entire sector. A longer term short trade is worth researching based on the trend in place on the chart as well as the earnings and sales data fundamentally over the last three quarters.

Chart

 

Busy day across the board and plenty of information for all. The challenge is the noise… too much about Apple and not enough about the outlook for the economy. We are getting reports on same store sales and they didn’t hold up as well as expected, and the Sales report for August is due out Friday. Downside pressure in play today… does it follow through tomorrow or do we bounce? Proceed with caution and look for the resulting opportunities.