New Trend? Dump AAPL to Buy MSFT?

For most of the 21st century Apple has been cool, while Microsoft couldn’t do more than drool. But things are changing (at least for investors). Microsoft has gone from ‘drool to cool’ on Wall Street. Will this surprising trend last?

Apple is hip and cool. Microsoft is boring and outdated. Apple (Nasdaq: AAPL) is in, Microsoft (Nasdaq: MSFT) is out.

That’s been the case most of the 21st century, but there’s been an odd shift lately.

Investors are picking MSFT over AAPL.

If Microsoft’s Cortana had a voice in this article, she’d point out that investors are dumping Siri to be with Cortana.

The charts below show that Cortana may be right.

The MSFT:AAPL ratio chart shows the ratio bounce off a 1-year support level. If the ratio can overcome near-term resistance it is likely to climb further.

This would suggest MSFT will continue to outperform AAPL, at least for a little while.

A look at history, in particular recent history shows that September is a particularly painful month for AAPL investors. Click here to view a detailed look at AAPL seasonality.

AAPL and MSFT are the two biggest components of the PowerShares QQQ ETF (Nasdaq: QQQ), which sits right above important support (QQQ support level shown here).

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Advertisements

Why ‘Hot New Tech’ is Getting Crushed by ‘Old Tech’

Until recently, the Nasdaq was driven higher by hot new tech names like Facebook, Priceline and Tesla. Now, ‘hot new tech’ is cooling down while tech dinosaurs are rallying higher. What does this rotation mean?

Priceline, Netflix, Facebook and Tesla are the driving force behind a ‘new and improved’ technology boom.

Those companies are cutting edge, hip, and until recently hot.

But something changed in March. Hip wasn’t hot anymore. PCLN, NFLX, FB and TSLA are all of a sudden 10 – 20% below their highs.

It seems like the money left ‘Hot Tech’ and moved into ‘Old Tech.’

Dinosaurs like Microsoft, Oracle, Cisco and Intel just got a vitamin M shot and boost (M as in Money).

What does this ‘changing of the guards’ mean?

Here’s one possible reason: Stocks in general and the Nasdaq in particular have gotten pricey.

Investors don’t want to go into cash (yet), but they are taking some risk off the table by rotating from high beta tech into ‘tried and true’ low beta tech.

As the third chart illustrates, the Nasdaq (Nasdaq: ^IXIC) has also started to underperform the S&P 500.

The S&P 500 (NYSEArca: SPY) is now top dog and just spiked to a new all-time high this morning. Is this a technical breakout or just another fake out?

Here are two charts that may well change your expectations for the S&P 500:

S&P 500 – Stuck Between Triple Top and Triple Bottom – What’s Next?

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Will a ‘Bad Apple’ Spoil the Rest of the Market?

AAPL is down 35% while the Nasdaq is moving higher and the S&P 500 is trading at new recovery highs. Is this bullish for the broad market or will ‘a bad Apple spoil the whole bunch?’

An apple a day keeps the doctor away or so the saying goes. Up until recently Apple (as in AAPL) also kept any bear market away.

For much of 2009 – 2012 the stock market followed this simple formula:

rising AAPL = rising stocks.

Theoretically falling AAPL should = falling stocks, but that hasn’t been the case. Why? And is that bullish or bearish for the broad market going forward?

AAPL – From Leader to Laggard

The chart below shows the percentage gains of AAPL and the Nasdaq Composite since 2012.

Until mid-November AAPL and the Nasdaq traded directionally in sync. Rising AAPL = Rising Nasdaq and vice versa. That changed by late November, when Apple started heading south and the Nasdaq north.

How can this be? Other companies started to pick up the slack and fill the void Apple left behind. Google for example started to rally in November. So did Microsoft, Oracle, Amazon, Cisco, Qualcomm, and others.

The second chart illustrates GOOG’s recent counter-AAPL performance. As shares of other technology sector stocks rallied, their market cap and weighting in the Nasdaq increased.

As AAPL tumbled, its weighting (and importance) in the Nasdaq and S&P 500 decreased. Not only did Apple shares tumble 35%, its weighting in the Nasdaq did the same. It fell from over 20% to 13%.

At its best, AAPL accounted for nearly 5% of the SPDR S&P 500 ETF (SPY) compared to 3.62% today.

Apple’s relevance to the overall U.S. market diminished as Apple shares spiraled lower.

Technical Apple Analysis

The chart below is an updated version of the log chart I first introduced in an August 24 video analysis about Apple.

My comment at the time when AAPL traded at 675 was: “I would like to see a more deliberate test of the upper channel line, but being out of AAPL seems like a prudent move.”

A later issue of the Profit Radar Report recommended to go short with any push above 700.

Getting back to the log chart of Apple; the black parallel trend channel provided a target for the high as well as an initial target for the first leg down. After back testing the lower parallel channel line once more (kiss good bye), AAPL embarked on the next leg down.

On Friday, AAPL closed below support, now red resistance. RSI has not yet reached a new low to confirm the price low. This could be the setup for a bullish divergence, but I would wait for more confirmation in the form of a close back above the red line.

Use that trend line as basis for your stop-loss, because I am following a new parallel channel and a break below this channel support could trigger a bearish technical break down pattern with a significantly lower price target.

Interesting Apple developments and possible profit opportunities will be covered by the Profit Radar Report.

Will Google’s Fumble Take Down the Entire Technology Sector?

Due to a combination of facts, Google shares dropped as much as 11% on Thursday before trading in GOOG was halted by the Nasdaq. What caused this meltdown and will it carry over and drag down the Nasdaq and technology sector?

Google couldn’t wait to share its disappointing Q3 earnings with Wall Street. Although slated for an after-hours earnings report, Google accidentally spilled the beans around 12:30 EST.

At first it looked like a refreshing change to Washington’s modus operandi of extend and pretend or snore and ignore. But as it turns out, R.R. Donnelley (the company that does Google’s financial filings) accidentally filed Google’s 8-K form too early.

Heading for the Exits

Surprise turned into disappointment and distain as investors dumped GOOG as fast as they could. At one point GOOG was down $83.43 or 11%. Nasdaq even suspended trading in GOOG. Why the rush for the exits?

Analysts surveyed by Thomson Reuters expected earnings of $10.65 a share and net revenue of $11.86 billion.

The actual profit was only $9.03 a share on revenue of $11.33 billion. Another  major concern was that the average price that advertisers paid Google per click fell 15% from a year earlier. If Google, the king of monetizing advertising dollars, can’t charge top dollars anymore, how will Facebook and others?

What’s Next for Google?

Google is the third largest component of the Nasdaq-100 Index (corresponding ETF: PowerShares QQQ) after Apple and Microsoft. What does Google’s sell off mean for the Nasdaq QQQ and the technology sector (corresponding ETF: Technology Select Sector SPDRXLK)?

GOOG trading volume was through the roof as prices tumbled below the 20 and 50-day SMA and a couple of trend lines. Prices generally stabilize somewhat after large sell offs like this before falling a bit further. A new low parallel to a bullish price/RSI divergence would be a near-term positive for Google. Next support for GOOG is around 660 and 630.

Will Google Drag Down the Technology Sector?

The Nasdaq Indexes and the Technology Select Sector SPDR (XLK) has been much weaker than the Dow Jones and S&P 500 as of late. There were no bearish divergences at the recent S&P and Dow highs. This lack of indicators pinpointing a major top limits the down side of the tech sector.

Key support for the Technology Select Sector SPDR (XLK) is at 29.50. A move below 29.50 would be technically bearish although there may not be much more down side. Traders may use 20.50 as trigger point for bullish and bearish trades.

Simon Maierhofer shares his market analysis and points out high probability, low risk buy/sell recommendations via the Profit Radar Report. Click here for a free trial to Simon’s Profit Radar Report.

Apple Becomes Second Most Valuable Brand in the World, But Traders Get Scared

Apple is the most valuable company in the world. Now it is also the second most valuable brand in the world. Nevertheless, traders are concerned about Apple stocks which is reflected in the price of options.

According to brand consultancy firm Interbrand, Apple’s brand value increased 129% to $76.57 billion last year. This makes Apple the new #2 on Interbrand’s list of the top 100 brands.

Apple is followed by IBM ($75.53 b), Google ($69.72 b) and Microsoft ($57.85 b). #1 and the only non-tech company in the top 5 is Coca Cola with a brand value of $77.83 billion. The chart below shows the top 28 brands.

Apple’s growth outpaced even Google’s steep growth trajectory. Apple and Google surpassed Microsoft for the first time ever.

Interbrand’s key valuation aspects are the financial performance of the branded products or services, the role of the band in the purchase decision process and the strength of the brand.

Traders Become Skeptic

As of recent Apple has hit some speed bumps. It didn’t sell as many iPhones as expected and basically had to admit that Apple maps is inferior to Google maps.

More importantly, Apple’s stock (AAPL) became too overbought. Even before the iPhone went live and Apple maps draw criticism, the September 12 Profit Radar Report recommended to: “Short Apple (or buy puts or sell calls) above 700.”

With Apple trading about $35 below its all-time high, option traders have become unusual bearish. Bloomberg reports that bearish Apple options are the most expensive relative to bullish options since late 2011. This seems like an overreaction considering a moderate drop of only 5%.

Newsletter writers that cover major stock market indexes like the S&P 500 saw a similar sentiment movement. The percentage of bullish advisors polled by Investors Intelligence dropped from 54.20% on September 18 to 46.80% on October 2. The SPDR S&P 500 ETF (SPY) lost less than 2% during that time.

The S&P 500 continues to trade within a parallel trend channel and support for Apple is at 660, 650 and around 635. It seems that the immediate down side for stocks and Apple is limited.