Is Apple’s Success Clouding The S&P’s Rally?

Apple had a wild day on Wednesday. The stock made all-time highs in the morning soaring to over $526 dollars a share only to tumble on record volume to settle around $498 a share down $11 dollars on the day. Right now it appears that the tail is wagging the dog, wherever Apple goes so goes the NADSQ Index.

Apple has become so large in the weighting of the NASDAQ index that on most days its 17% load will cause the index to move its way. Many analysists are now growing wary of such a monstrous weight of one company. During recent earnings season Apple earned over $13 billion and its earnings as a percent of total companies in the NASDAQ were really out of line.

Now the bigger index which also has Apple as one of its components, the S&P 500, is also getting skewed results from Apples earnings. In the fourth quarter of 2011 the average company earned 6% more than it did in the same period in the 2010, if you include Apple. If you drop Apple as part of the equation the change in fourth quarter earnings is more than halved.

In the past thirty years there have been other instances where a company’s market cap was actually higher than Apple, Microsoft and Exxon being two of them. What the S&P did then is what it is considering doing again.

They are considering issuing two indexes. One that will include Apples price and its earnings the other will be “ex” the stock. It would give investors a better picture of how the index is really performing but it would not change the price that it trades, Apple would have the same weight.

Should you consider changing your style of trading because of what Apple is doing to the indexes?

Should you buy Apple stock because “it can only get bigger”?

Neither one of those choices is answering to the problem. You should do what you what I teach. Don’t try to predict the market, learn to react to it. That takes discipline and I can teach you how to use it to trade better.

Here is what one of my students had to say about discipline.

Todd,
Just wanted to drop you a quick note. I really get so much more out of these sessions when I listen to the recordings a second and third time. What I observed, after reviewing today’s session, is a very knowledgeable and articulate instructor working with a student who’s thinking process and absorption rate of new information is not quite as fast as it used to be. At one time I was in a similar position as a flight instructor. I worked with new students as well as advanced students on different aspects of piloting airplanes. Some of the students grasped the concepts and principles quicker than others. Some of the students, though they were a little slow in the beginning, eventually wound up being some of the best pilots that I trained.
I am enjoying the program very much, and am looking forward to some positive results. I admirer your positive attitude and great teaching methods!
Best regards,
Dave Rushing

To learn firsthand how I would trade giant markets like Apple speak to one of my representatives and sign up to work one-on-one with me here:

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As Always,

Keep those stops tight.

Todd “Bubba” Horwitz

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