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The market continues to hold up in this upper consolidation range, waiting for something to help juice optimism and send the market higher. The rebound from the recent low has been strong, but concerns remain as to how much of this rally is based on fundamentals or rather there is no place else to go for returns. There are certainly good sectors and stories out there, but the economic reality should not be lifting all boats, clearly the Fed and monetary policy is a significant contributing factor.


The hype heading into this week continued to mount as the world waits for the next iThing. Lines at Apple stores started last week and showers are at the ready this evening after the fan boys zombie their way home as they focus on their new shinny iThing.

Historically these releases, in the Jobs era, have been revolutionary. I remember living in San Francisco and had attended a few of the Mac Expos and was once fortunate to see Jobs address the audience. I was not there for the first iPhone release, but was in the city and had friends attend. It was certainly an historical moment in technology history and his presentation is on YouTube (worth watching). Apple was never a one hit wonder; iMac, iPod, iPhone, iPad, MacBook Air (which I own as well). Usually companies have one huge hit and then regurgitate it to keep it fresh with a new look, but to roll-out product after product of ground breaking innovation is unheard of. Jobs will truly be remembered as another Ford or Edison.

Cook Era?

Courtesy of wikipedia

Times has changed, how much of Apple was Jobs and how much of it was Apple? I can easily answer that question by reviewing history. Apple in its early inception with the team of Woz and Jobs was revolutionary, then as it became corporate, Jobs – the CEO and Founder was literally booted from the company in favor of a more traditional business approach. The company thought the Mac was the one hit wonder and they didn’t need a know-it-all, arrogant, young fool running the company. Jobs left and we saw what happened to Apple. It almost failed and embarrassingly enough they even got a bailout from their arch rival Microsoft, who bought none-voting shares just to keep Microsoft’s weak competition alive. We all know what happened, Jobs came back and changed the world – it’s wasn’t Apple, it was Jobs.

It’s the Tim Cook era and so far he may be excellent at executing existing pipeline of products making it a little bigger, little smaller, little cheaper, adding a little color, a higher pixel camera, but nothing revolutionary has come out the door since Jobs unfortunate and far too early departure.

From an investor stand point, Cook has done a great job keeping products moving. Unfortunately he made some missteps with management, fumbled with the initial China phone release, released two many versions of the phone and iPads which created market over-lap and self-competition. All in all, taking over the reins from Jobs is no easy task and one that would be highly critical by even the most ardent Apple supporter. Revenue looks good, but the heady days of growth are starting to see constraints as Samsung and Android continue to dominate market share.

iWatch and iPhone 6?

So today is the day in which many will be looking towards Apple to see if it still has that innovative spark left. Can Apple under Cook’s leadership release the iWatch that will revolutionize an entire market segment much like the iPad, iPhone, or iPod? They are NOT the first to market, so it is not exactly revolutionary, perhaps we should judge on whether it is innovative. The couple of iWatch type products out there have not grabbed hold of the consumer and driven huge new vertical revenue streams. Sony, Samsung, LG, and others have already released smart watches. I believe that wearable technology will eventually become a multi-billion dollar industry. The question is whether Apple is still the crown in innovation or is it just becoming another brand.

Courtesy of bestsmartwatchescompared

Apple is supposed to also launch a bigger iPhone as the larger format phones are becoming more popular. This also impacts iPad mini sales as the larger format iPhone will most likely be a valid option. The question becomes how much does the new iPhone hurt iPad mini sales? Again competing in the same space means that margins, costs, and marketing impact each product line. Jobs once said he like to keep it simple and when products over-lapped one had to go. He didn’t want multiple versions, he would make one version. What in some ways seems an end of strong product growth is when you have to start issuing multiple versions of the same product, it’s like the company is crying out for market share; we need a pink one for girls, blue one for boys, big one for big people and a small one for small people. All that means more costs and the more choices you give the more consumers, and they will comparative shop not only within your own product line, but against other product lines. “Which one to buy?” is a question you never want your consumer asking.

Courtesy of cnet

Intra-day Volatility!

Every Apple release will receive the hype, much like the fan-fare of the 2008 “Hope and Change” Obama election. Unless there is actual Change that meets with the expectation of Hope, then much like the post-election blues we could see Apple stock come under pressure, when everyone realizes it is just another President or just another iPhone. Perhaps they will say he is a better spoken President or the new iPhone has a nicer screen, but deep down the Hope never materialized into the Change we need or want.

Expect volatility – we could see Apple stock rocket to 110+ or quickly fall to 90. I doubt it will just hover around 100.

Apple can also set the tone for the NDX index and also the entire market. Expect lots of hype and excitement, but will that translate into innovation or just a rehash of an existing product?

Support & Resistance

INDU 17,000+
The Dow Jones continues to hold up well. Apple could drive the all indices higher or lower on its product announcements. Expect some volatility and watch the 17,000 for support.

NDX 4050
The NDX will most likely see some big intra-day volatility on Apple product announcements. I would look at 4050 as short-term support and we could see a rocket move higher above 4100.

SPX 2000
We are holding around this area, but expect volatility. We could close above or below 2000 today, but don’t look at a trend change yet. This remains a consolidation area. VIX is pricing in a slight bit of uncertainty, but in the mid-12 range it is not too concern about a market drop.

RUT 1165
Again watch the 1165 level for support. Regardless of Apple news that may drive the indices in which it is an over-weight, don’t ignore the RUT as it is giving a broader measure of market action. We could have a convoluted day in which the Dow Jones is up and the RUT is down, or visa-versa, all because of one highly watched stock.

Early action by the Fed?

Can the market maintain strength as we wait for the FOMC meeting later this month? There remain broad concerns if one ignores the headline media. Read the Fed minutes more closely, look at the numbers behind the headlines, and monitor leverage and volume levels. It seems that there is some strains keeping this market aloft and the Fed remains the crutch.

As I continue peer deeper it seems that Fed may not be able to hold off this next meeting with just keeping the status quo, the concern about the rising dollar is starting to bring real concern to the trade gap and international business growth – all of which have the ear in Washington. Pressures may be brought to bear from both Congress and big business to get that dollar back down quickly by the next meeting and they can’t wait until October.

If the Fed holds their wild cards until the October meeting, leaving it as the last big play before the mid-terms, we could see the market come under some pressure in the near term as we may see the stress of the stronger dollar start impacting the broader market.
Watch closely.

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