Although Alphabet (GOOGL) is seeing a negative reaction to earnings, the indices continue to move higher. For the second day in a row Apple (AAPL) is doing the heavy lifting and is leading a number of big-cap technology stocks higher.
Apple is technically extended after this straight up move following its earnings report but there obviously are willing buyers.
Who are these people?
Some of the buyers are those afraid of missing out on a rally that doesn't seem to want to end. They like the long-term fundamentals of Apple and aren't worried about exact entry points. They will pay up because they are more worried about missing upside than being caught in downside.
Another group of buyers are fund managers that are trying to keep pace with benchmark indices. Apple has a higher "beta" than many other stocks, which simply means that it moves faster than the average stock. If you want to play catch-up with the indices a big, liquid name such as Apple is a good way to do it.
A third group of buyers is the computer algorithms. This group is secure that it can move fast enough to escape the moment Apple might weaken, so they keep pressing as long as possible. They have no fear of overbought market conditions.
Momentum tends to feed on momentum and that is what is driving Apple.
While the indices still look like they don't have a worry in the world, I am taking the opportunity to cut back on a number of positions. I do this periodically because I believe that it helps to give me a fresh perspective. There is some attempt at timing, but this is more about making sure I am in tune with the market action. Nothing gives you more objectivity than having a higher level of cash.
While I still see no indication that this V-shaped move is coming to an end, I don't feel at all bad about selling down positions and then looking for some new names to buy. I will discuss this more in my next post but strategically it feels right to do some selling regardless of the continued market strength.