At Thanksgiving dinner this past weekend, my 12-year-old nephew reported to me that one of his teachers had started the class on a stock-market game at the beginning of the month. Each student was given a hypothetical $100,000 to invest from now until school lets out in May and, obviously, the one with the most money at the end will win.
I asked him what stocks he bought -- and, so far he had only bought one. I will give everyone two seconds to guess which one it was. If it takes you longer than that, you have not been paying attention this year.
Of course, I smiled when he told me, and then I asked him, "Is there anyone in your class who doesn't own Apple (AAPL)?" He responded, "No. But how did you know everyone owns Apple?"
If this is not proof that Apple is its own index -- when an entire class of 12-year olds knows it's the stock to buy -- then I don't know what is!
Turning our attention to the rest of the market, stocks are moderately overbought -- it's not an excessive or an extreme reading. I suspect the market will back off for a day or two and rally again. The market will be back to short-term maximum-overbought early next week.
In the same way that every 12-year-old in my nephew's class knows to own Apple, any market player who looks at a chart of the S&P 500 can see there is resistance up here.
On the sentiment front, I was shocked to see the Consensus Inc. bulls down to 42%. These results often move in conjunction with the Market Vane survey, yet the latter still shows bulls at 58%. That is the lowest reading for the Consensus Inc. bulls we have seen for more than a year, and it means the bulls in this survey did not even get this bearish at the June lows. If this ratio manages to decline under 35%, we'll typically see a multi-month rally. At 42%, we'll just call it low. At this point I doubt we'll see it fall under 35% in the next week or two.
I also want to do a quick follow-up on oil. When I showed the chart last week and said that, if it could pull back, retest that line and rally, a climb through $90 per barrel could get as far as $95-ish. So far, it is moving according to plan. The next step is getting through $90 to make a stab at that $95-ish target.
Gold, on which I had been quite wishy-washy, ended up breaking out. The price would measure to $1,775 per ounce, which is where you can see there is now resistance on the chart.
Finally, you might recall I turned bearish on the Dow Jones Utilities Average last summer, when the index was at around 490. I received quite a bit of negative mail on the subject, and it took look long enough for the utes to collapse -- but it did eventually happen, and the index is now down nearly 13% from the highs of last summer. The measured target was between 430 and 440 from the giant head-and-shoulders top. I suspect there is much more base-building to do before the utes can stabilize enough to enjoy more than an oversold rally, but the time to be bearish on this is finished. Now we're getting close to a point when we should consider warming up to this index.