On The Run {01.24.13}

Just a quick note between conference calls this am.  All financial news today is dominated by Apple {AAPL}.  That stock has been telling you something has been wrong for months and yesterday's conference call where their results were just so-so is final confirmation that things are a little off kilter there.  From my perspective the quarter wasn't the disaster that many analysts seem to think it was.  But AAPL is a high expectation company.  In that kind of environment you had better not only beat earnings expectations but guide earnings higher.  AAPL did neither of those things yesterday.  

I don't own AAPL directly although many of the ETFs I own for clients have APPL in their indices.  A few clients own it on their own volition and I'm going to have to decide what yesterday means for them with the stock.  My gut is that when the dust settles AAPL may be in a better place for purchase as expectations have now been lowered and the froth is definitely off this name.  Problem is I don't know from what level the dust settles.  At the end of the day the company made a ton of money this quarter and on a fundamental basis it's cheap assuming earnings hold out.  We'll have to see how this shakes out in the coming weeks.  

The bigger concern I have is whether AAPL is now a catalyst for some sort of stock market correction.  Stocks have rallied 10% since their lows on 11.16.12 and are now overbought in most of the time frames we measure.  That by itself does not always imply a correction as stocks can stay overbought {and oversold for that matter} for longer periods of time.  What does concern me is that the percentage of stocks trading above both their 40 and 200 day moving averages is now at levels from which corrections typically develop.  The 40 day stands at 84.62% of stocks trading above its level and the 200 day is at 81.27%.  Anytime you get extremes like this,  the probability of an opposite reaction increases.  In this case that opposite reaction would be a correction in either time {churning market}, price {market sell off} or a bit of both.

I'm going to take some time today to evaluate what I think all of this means for the portfolio.  I think a change in the short term indictor may be coming soon.  Will let you know.

*See above highlights in red for my disclosure on AAPL.