This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Apple Broke; Stock Market Will Follow

NEW YORK ( TheStreet) -- In my article, If Apple Breaks $419, the Stock Market Will Break, I warned that a break of that critical support level would spell trouble for the entire stock market.

Apple (AAPL - Get Report) is the most valuable and influential stock in global stock markets based on a combination of market capitalization and its trading volume.

Although Apple's stock price decoupled from the broader market several months ago due to idiosyncratic factors specific to Apple, I believe that any further downside for the stock will serve as an indicator of more widespread worries about sales growth and profit margins for the stock market as a whole.

The importance of Apple does not merely arise from the huge weighting (about 5%) that Apple's EPS represents in the overall EPS for the S&P 500 (^GSPC).

The situation with Cirrus' (CRUS - Get Report) earnings warning today is just one example of how the fate of Apple is inextricably linked with the fate of many companies in the stock market, particularly those that comprise technology sector indices such as Nasdaq 100 (^NDX) and index ETFs such as PowerShares QQQ (QQQ).

But troubles with Apple will merely serve as a psychological trigger that will likely prompt many investors and traders to examine the deteriorating fundamentals in other sectors besides technology.

For example, as a result of the ongoing crash in commodities prices, the EPS estimates of the entire basic materials sector of the S&P 500 are going to be have to be revised drastically lower. And the entire energy complex which has a huge weighting in the S&P 500 (about 11%) and ETFs such as Energy Select SPDR (XLE) is likely to have its EPS estimates seriously downgraded as well due to declining oil and gas prices. Here the key level to watch is $84 on WTI crude oil. I would expect a break of that level to trigger a 15% correction in energy sector stock prices.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
QQQ $106.66 0.89%
XLE $67.43 -0.10%
XLY $80.30 1.40%
AAPL $93.66 -0.09%
CRUS $36.32 0.61%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs