Stock Market Battles for All-Time Highs as Apple Spoils

ETFs and major stock indexes rise for sixth day, but Apple suffers after hours smack down on earnings miss.

apple computer, apple, aapl, nasdaq:aapl, spy, qqqThe recent bull run in ETFs and U.S. stock indexes continued Wednesday with major markets up for the sixth day in a row on positive earnings and an extension of the debt ceiling debate into May. However, the streak might not last another day as Apple (NASDAQ:AAPL) dropped 10% in the after hours session on its disappointing earnings forecast.

Wednesday, the Dow Jones Industrial Average (NYSEARCA:DIA) was up 0.49%, the S&P 500 (NYSEARCA:SPY) gained 0.15%, the Nasdaq 100 (NYSEARCA:QQQ) advanced 0.58% and the Russell 2000 (NYSEARCA:IWM) turned red with a -0.28% decline.

The Dow Jones Industrial Average (NYSEARCA:DIA) is at levels not seen in September, 2007.

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In other major markets, gold (NYSEARCA:GLD) fell 0.28% to settle at $1686.70 and oil (NYSEARCA:USO) declined 1.42% to $95.23/bbl.

The S&P 500 (NYSEARCA:SPY) now sits less than 6 points below the psychologically and technically important 1500 level.  It has been here twice before, in 2000 and 2007, and both times failed to move higher with significant bear market declines ensuing shortly thereafter…

In 2000, the S&P 500 (NYSEARCA:SPY) peaked at approximately 1522 in March, 2000, and then fell to a low of 768 in October, 2002, a decline of  approximately 50% now fondly known as the “tech wreck.”  In October, 2007, the S&P 500 (NYSEARCA:SPY) peaked in October at 1565 and then fell to 666 by March, 2008, a bear market decline of more than 50% that we now call the “Great Recession.”  

Will history repeat or even rhyme?  Or will this time be different and mark the onset of a new bull market?  “Mr. Market” will tell us soon enough, but clearly, we are at a major turning point in U.S. stock market history. 

On a technical level, markets are now significantly overbought and so a pause or correction would be entirely consistent with normal stock market and ETF behavior.

The big news during the business day was the U.S. Congress kicking the can on the debt ceiling debate into May.  This relieves pressure on the markets and allows political leaders to focus on the spending cuts due to hit in March as the second half of the fiscal cliff debate continues.  This March showdown was set up by the now famous New Year’s Eve “solution” to avoiding the fiscal cliff on New Year’s Day.  That deadline was the result of the failed debt ceiling debate in the summer of 2011 and so a repeating pattern of delay and disagreement is more than clearly evident.

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The big news after hours was Apple (NASDAQ:AAPL) the world’s largest company that makes up approximately 10% of the Nasdaq and nearly 4% of the S&P 500, (NYSEARCA:SPY) along with being a major holding of many mutual funds and hedge funds.  Apple (NASDAQ:AAPL) barely beat earnings expectations and spooked investors with a weaker than expected revenue forecast for the upcoming quarter and no earnings forecast which inserted an element of uncertainty into the company’s future…

Notable Stocks and Sectors:

Tech Sector (NYSEARCA:XLK)

Google (NASDAQ:GOOG) +5.5%

Intel (NASDAQ:INTC) -0.28%

Apple (NASDAQ:AAPL) +1.83%

Energy Sector: (NYSEARCA:XLE)

Chevron: (NYSE:CVX) -0.78%

Financial Sector (NYSEARCA:XLF)

Bank of America (NYSE:BAC) +0.62%

Wells Fargo (NYSE:WFC) -0.26%

Citigroup (NYSE:C) +0.57%

Thursday’s earnings reports bring weekly jobless claims, leading indicators and Markit PMI, along with earnings from a large number of banks and Microsoft (NASDAQ:MSFT) and Starbucks (NASDAQ:SBUX) after the close.

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Bottom line: Expect a rough open, particularly for the Nasdaq, (NYSEARCA:QQQ) based on Apple’s (NASDAQ:AAPL) after hours slide and then a titanic battle will ensue around the significant 1500 level on the S&P 500 (NYSEARCA:SPY) Overbought technical conditions would point to a pause, pullback or possible correction.  Significant support rests at the 1470-1430 level and so action over the next several days will be critical as major stock indexes and ETFs react and absorb Apple’s fall.

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John Nyaradi is the author of The ETF Investing Premium Newsletter.