Strength in a couple DJIA stocks is covering up some very poor market action. The DJIA is particularly misleading at times because the stocks are price-weighted, which means a move in IBM (IBM) is given more than 20x the weight of a move in Bank of America (BAC), even though IBM's market cap is not even 3x Bank of America's.
The media has always preferred the DJIA. As a result, that is what many people consider to be the market, but it is often an extremely poor indicator of what is really happening.
The real story today is poor action in momentum stocks. Apple (AAPL) is obviously the biggest culprit (and has been for a while), but virtually all big-cap momentum names have broken down to some degree now. Names such as Priceline (PCLN), Chipotle (CMG), Lululemon (LULU), Salesforce (CRM), Tempur-Pedic (TPX), VMware (VMW), Alexion Pharmaceuticals (ALXN) and so on are under fairly severe pressure.
Surprisingly, breadth is still quite good as we have some bounce in small-cap names, but this action has all the hallmarks of a dead-cat move. Volume is running very light, and there isn't any chasing. In fact, many of the stocks that started the day strongly are well off their early highs, although still in the green.
Hopefully, the Apple earnings report will help clear the air, but there are obviously some major worries there after both Verizon (VZ) and AT&T (T) indicated that iPhone activations had slowed. Apple is a notorious low-baller, and everyone knows that management purposely sets guidance too low so that the compnay can "surprise" the market. The surprise is already built in, and if the upside isn't big enough, it could be a problem.
The action in key momentum names is troubling. Maybe Apple's report will help put a bottom in the trend, but there is some danger that the company could post mediocre news and put even more pressure on the momentum favorites as their multiples shrink.
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