Warning—Apple’s Share Price a Major Red Flag

Warning—Apple’s Share Price a Major Red FlagThe stock market has got legs for further price appreciation, and a lot of brand-name companies are hitting new 52-week highs. But while the main stock market indices look poised for further advancement, we have to keep a sharp eye on the leading technology stocks. The “AGA” stocks (Apple, Google, and Amazon) are the key to the current trading action.

These three technology stocks are obviously heavyweights, and if they break down, it’s highly likely that the rest of the stock market will follow.

Apple Inc. (NASDAQ/AAPL) is today’s benchmark among technology stocks, and interestingly, the stock has not participated with the broader market for the last couple of weeks. Other technology stocks are trading right at their highs, but Apple’s performance is something to watch closely. I don’t think it’s a major technical breakdown yet, but if the shares don’t turn higher soon, the rest of the market will be very vulnerable. Apple’s stock chart is below:

Apple Chart

Chart courtesy of www.StockCharts.com

Technology stocks and biotechnology stocks have been on a tear since last fall, and without question, they are the stock market’s leaders. But so many other brand-name companies are hitting new 52-week highs right now that there is a high probability the stock market will keep moving up over the near term. (See “Stock Market Success: Why It All Comes Down to the Fed.”)

Former bellwether General Electric Company (NYSE/GE) has done very well over the last 12 months. 3M Company (NYSE/MMM) is trading right at its all-time high, and so are The Walt Disney Company (NYSE/DIS), Wal-Mart Stores, Inc. (NYSE/WMT), Colgate-Palmolive Company (NYSE/CL), Kimberly-Clark Corporation (NYSE/KMB), and Amgen Inc. (NASDAQ/AMGN), to name a few. Whether you’re in this market or not, it is a mini bull market, and it should last through to the end of the year.

The NASDAQ Composite has been a great index for technology stocks, as well as other important industries. If you pull up a very long-term chart on this index, you’ll notice that it has been appreciating quite consistently since 1975. If you exclude the bubble in technology stocks in the late 1990s, the index just looks like it is carrying on with its long-term trend. In spite of the setbacks, its uniformity of performance has been amazing.

There are all kinds of problems with the mini bull market we’ve been experiencing, but given stock market valuations (even among those trading at all-time record highs), there is room for further price appreciation. Technology stocks and the “AGA” stocks, in particular, are the leaders in this market, and their trading action is important. The only recent non-confirmation among technology stocks is Apple; if it breaks $635.00 a share, the rest of the stock market is in big trouble.