Yale & Jeff Hirsch
About the Editor Jeff is editor in chief of the Almanac Investor newsletter Stock Trader's Almanac, StockTradersAlmanac.com, and the Hirsch Organization. He makes frequent appearances on CNBC, CC, Fox, and Bloomberg. Yale Hirsch is founder of the Stock Trader’s Almanac.
Round numbers and the price of Apple shares have captured the majority of the headlines recently, notably; DJIA 13,000, Apple $500 (today $600), NASDAQ 3,000 and S&P 1400. Aside from Apple’s performance, all of these numbers leave me less than satisfied, harboring feelings of been there, seen it already. And even Apple feels and looks like it has fallen to bubble syndrome. Price targets for Apple have been lifted again and the valuation argument has been used so many times now that my dog, Lillie, now understands just how cheap Apple is (or appears to be depending on which projections and assumptions are used). Round numbers make great milestones however; they are not that useful in determining the next most likely direction. In yesterday’s post titled $DJIA In Top Formation, Jeffrey Hirsch, presented a solid case that the market was most likely forming a top. This is an opinion that I do agree with. Everyone’s fixation on Apple and round numbers is not healthy. Does anyone else remember NASDAQ 5000 in 2000 or DJIA 14,000? Neither of those turned out well. Another area of concern is the laggard performance of small-caps over the past six weeks. Small-cap companies tend to be domestically orientated and thus are more sensitive to the health of the local economy (U.S). Since the close on February 3, small caps, measured by the performance of iShares Russell 2000 (IWM), have gone virtually nowhere gaining a paltry 0.1% compared to a 4.5% gain by SPDR S&P 500 (SPY) through today. It is not time to take a defensive posture yet as the trend for most indices remains up. It is time to look past the milestone headlines and maintain a vigilant eye on economic data and portfolio holdings. This rising tide is not lifting everything higher.
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