Will Bulls Regain Control To End August 2012 In Apple Rally Mode?
The August 2012 rally has gained steam this week after a rangebound trading two weeks ago following a bearish weak last week. Stocks still seem like a good opportunity for buying on the dips and Apple’s strength doesn’t suggest it’s a time to short stocks at the moment. Apple makes up a strong portion of the S&P 500 as well as the NASDAQ and the iPhone 5 launch next month is lifting all boats in regards to equity prices short term.
We are watching Apple as a leading indicator of market sentiment. Technology stocks are also a good buy with shares of companies like Oracle up in double-digit percentages already this year.
Traders coming back from vacation will need to chase performance because ‘sell in May and go away’ didn’t work this year and comparatively speaking, some traders are underperforming the overall market by not being aggressive this summer. We believed this August would be much better than last year and so far our analysis has been correct. We have moved from neutral to bullish but with a defensive posture. Stock prices have run up quickly and downside risk potential exists with increased volatility. Short-term rangebound trading in Apple would allow other stocks to catch up and a significant reversal would be necessary for us to reevaluate our analysis.