This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

As Apple Sours, Take a Bite of Small Cap

Stocks in this article: IYW AAPL QQQ IJR PSCT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( The FRED Report) -- The stock market rally continues, in line with our forecast, and we maintain our targets of 1400 to 1430 on the S&P 500 Index (SPX). But, there have been some interesting sector developments.

Follow TheStreet on Twitter and become a fan on Facebook.

The biggest concern has been some of the action in Technology, which has been one of the leading sectors -- we show a chart of iShares DJ US Technology (IYW) below.

Many pundits are suggesting that the lion's share of the sector (and possibly market!) move has been because of Apple (AAPL).

We do not agree with this as many technical indicators, such as advance decline oscillators, new highs/new lows and others, have supported the rally. Interested readers can see these in our Monthly Review. In addition, AAPL has had a key reversal day, where it made a higher high and lower low than the previous day. We show a chart of this below.

This key reversal pattern may turn out to be a significant high for AAPL. But, how will we know? It is relatively simple - if the high at 526.29 on February 15 is exceeded in the next two weeks the stock is fine. If the stock breaks below the low of 496.89 there could be problems, and the stock may decline toward 420 or so. This would likely affect the IYW, above, and the QQQ, below.

We want to show readers an interesting alternative to big cap technology -- small cap technology, shown below. This is an interesting idea, because U.S. small caps may outperform over the next year. We show a long-term chart of IJR below, and note that it has recently made all-time highs again. Small cap stocks almost always outperform when the economy is getting better after a recession. As economic numbers get better, these stocks have a tendency to outperform.

In conclusion, AAPL may be weakening, so we recommend readers work with their advisors on a risk management strategy in the event that something does go wrong. At the same time, few analysts are recommending small cap names, yet conditions are ripe for them to outperform. Thus, we suggest an allocation to small-cap technology at this time.

Fred Meissner is founder and publisher of The Fred Report. Fred is a CMT and past President of the Market Technicians Association (MTA). He recently left Merrill Lynch's Market Analysis Department and Sector Strategy Department to form The Fred Report.�A detailed bio is here:Fred Meissner.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs