ETF Midweek Peek

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.

By David Gillie

NEW YORK ( ETF Digest) -- No matter which way you turn the tables, Apple (AAPL) has taken over the world. ETFs rise and fall according to their holdings and relationship to AAPL. After more than a year of bailouts and headlines about Greece moving markets, its ultimate default on their bonds was a one-hour event in the markets. Even the air is being sucked out of U.S. Treasuries as AAPL is now considered an asset class of its own, despite not even having a dividend.

Certainly, the Fed's planned leak of a "sterilized" QE3 was so convoluted and obtuse that no one had any idea of its effect on the market so traders just bought AAPL. There is literally a panic in the streets to buy AAPL.

Top Performers

The non-event of Greece defaulting on its bondholders, gave the market the "risk on" signal despite some of the most anemic volume we've seen in years. Financials, most hurt by Greek default, became the prized trade. Small caps, which were in a major rollover pattern, were bought despite poor technicals.

The Nasdaq, technology and semiconductors catch a free ride on AAPL. "Irrational exuberance" is a term I'm hearing frequently.  (It's noteworthy that the top gainers are the biggest laggards. Indicative of traders "chasing" a rally)



New Highs

AAPL carried the Nasdaq and tech sector to new highs and even brought the mighty Dow 30 along with it. Health care, a defensive sector, got attention from some level-headed traders who wanted to enjoy the ride but not be directly tied into AAPL. Regional banks are still performing well due to being in the actual banking business and not a trading room with a teller out front the way the larger banks are.



New Lows

Anybody who bet against AAPL. Volume shows hard selling in the tech and Nasdaq inverses fueling a short squeeze.


Unusual Volume

The VIX hit lows we haven't seen since the 2007 euphoria. The best we can glean from the Fed's intentions is to make U.S. Treasuries an undesirable investment to force investors into the stock market to find yield at least equal to inflation. Odd that a country's intention would be to drive investors away, but it's an election year and anything is possible.

The stock market at an all-time high would bode well for an incumbent president. As the result, traders are shorting treasuries which had gone to extreme highs on Greek bond default. The unusual volume on gold and gold miners was on selling. Due to speculation, gold lost its position as a hedge on inflation and an alternate currency. Now it's in the hands of speculative day traders with little concern of its fundamentals. There is still a huge crowd of conservative investors seeking yield that aren't consumed by the AAPL euphoria. 


Overbought


Once again, AAPL has driven tech and the Nasdaq into overbought conditions but these are not at extreme levels yet. Although volume in the overall market is anemic, anything AAPL-related is getting high volume.

Japan, in need to devalue its currency to pay for the Fukushima disaster, has brought traders to short the Yen. YCS went into an extreme parabolic move up after it broke through resistance.


Oversold



This short squeeze across tech and the Nasdaq added to the AAPL fever. 



Trending Up

To a certain degree, the known is always better than the unknown on Wall Street. This virtually uninterrupted rally in the U.S. market over the past three months has given the financial mega bulls all they needed to overcome being the laggards of the past two years.

India has had a marvelous reversal out of a long downward trend. Homebuilders stalled, but the recent euphoria in the market gave the new energy to resume the uptrend.

Trending down

The most important issue on this table has escaped the media, the euro reversing trend and going down. This is a direct correlation to the dollar (rising) and U.S. Markets. An overlay of the euro and S&P500 is nearly an exact correlation. The rise in the dollar has pushed the Ag sector down although oil has largely escaped the dollar pressure on Middle East fears.

Currently, AAPL is in a parabolic upward move today. A $580 stock going up 3% to 4% a day scares the living daylights out of me. Call me skeptical, but it's beginning to smell "dotcomish." In turn, it is taking all the major indices up with it and most likely Asia will rise tomorrow on the euphoria. I'm happy for those who are enjoying a 50% gain in three months (not me). But I also fear what could happen to the entire U.S. market if there was a big selloff (or flash crash) in AAPL.

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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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