First released by the ‘Osmonds’ on November 14, 1970, the song “One Bad Apple” later debuted on the Billboard Hot 100 on January 2, 1971. 

Fifty-three years later, “One Bad Apple” roiled the stock market. Following a downgrade at Barclays (BCS) with a new share price target of $160, Apple (AAPL) tumbled by 3.58% (off more than 4.0% at one point in the session).

The question is: will it spoil the rally in the long term?

For all the talk of the Magnificent Seven, the outsized weighting of Apple and Microsoft (MSFT) is enough to make or break the entire market on any given session. Investors must not ascribe down sessions led by Technology (XLK) to the entire market.

Tech Wreck

With Technology taking it on the chin, the NASDAQ Composite suffered its fourth worst session ever.  There has been very little red on the NASDAQ Composite chart since October 26^th, and the rare times it has appeared, the declines were minimal. It might be premature, but I’m spying on a chance of filling the downside gap at 13,800 if the wheels come off. We aren’t betting on that, but it’s the target if profit-taking morphs into panic.

The NASDAQ-100, Invesco Trust, Series 1 (QQQ) is in an even more precarious position.

What About Rotation?

A week ago, the MegaCap-8 traded hands with an average Forward Price-to-Earnings (F P/E) ratio of 28 versus 19.5 for the overall S&P 500 and 17.3 for ex-MegaCap-8.

Ignoring Size Seeking Value

With such low valuations, institutional investors would seek opportunities hidden in plain sight. The Invesco S&P 500 Equal Weight ETF (RSP) was relatively unchanged.

Big Moves into Traditional Safe Havens

Market Breadth

On the NASDAQ, decliners swamped advancers.

Market Breadth	NYSE	NASDAQ
Advancers	1,350	1,863
Decliners	1,498	2,488
New Highs	46	108
New Lows	10	63
Up Volume	1.67 billion	2.62 billion
Down Volume	2.04 billion	3.15 billion

U.S. Manufacturing Purchasing Managers’ Index (PMI) was expected to arrive at 48.4 but stumbled to 47.9 from 48.2.

The Manufacturing Employment Index is beginning to collapse.

The November 2023 construction spending increased 0.4% from October against the consensus estimate of +0.6%.

The U.S. manufacturing construction spending increased by 0.5% from the prior month and 59.1% from a year earlier. Most of that spending is fueled by the federal government.

Message from Other Assets

Bond Market More Cautious

The economic data should have provided some hope for the market, but it's early in a week chock full of data releases, including the jobs report on Friday.

We are back to six rate cuts in the CME FedWatch Tool.

Yields on the Rise

Bond yields popped, and the ten-year is in the shadows of 4.0%, the trendline and a huge psychological swing point.

The U.S. Dollar (DXY) saw its best session since last March and closed at a pivotal technical level.

Number of the Day

Congratulations, Americans, the national debt crossed $34.0 trillion yesterday.

$

3

4,

0

0

1,

4

9

3,

6

5

5.

5

6

5

.4

83

Portfolio Approach

There are no changes in the Hotline model Portfolio.

Today’s Session

Even with members of the Fed being more vocal about a soft landing, the market is indicating to open lower. Today will be a good opportunity to see how aggressive the buy-on-dips crowd is after a great 2023.

Look for initial efforts to start around 10:00 EST.   

 

Tweet

 

Home | Products & Services | Education | In The Media | Help | About Us | Disclaimer | Privacy Policy | Terms of Use | All Rights Reserved.