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How sound are the drivers behind the bull move in US Stocks???  Well it all appears to be riding on stock buy backs and Apple sales.

About a week ago or so, the major US Stock Indexes were trading in a state of flux having given back about 5% of their lofty early year gains.  In fact, had the bear correction accounted for a few more percentage points on the downside, many of the impressive 2012 gains would have just about been gone.  But just when things looked a bit bleak, as the European elections exacerbated the plight of the EUROZone, along came the savior to US Stocks….Apple earnings news and guidance.  The resulting gains for all the major Indexes following this report have brought them almost back to the lofty highs set back just a few weeks ago.  Oh yes…the announcement of IBM’s $7billion stock buy back plan didn’t hurt things either.

Taking a closer look at the recent good ride in US stocks, it’s clearly apparent that the leader behind the bull move has been the Tech heavy NASDAQ Index with names like Intel, IBM and of course Apple accounting for much of the Indexes gains…and losses.  But is this the type of scenario you’d like to park a substantial amount of your investment funds…a sector that is ultra sensitive and is getting a large queue of its moves off of a few high profile stocks? 

The speculative forces are no doubt very high in Tech land as you can see the chaotic rally in the price of Amazon on Friday.  As we mentioned in our previous write-ups, one of the most crowded trades out there are the longs in the NASDAQ and QQQ that are riding a bullish head and shoulder pattern.   Yes, things can definitely go higher but the risk is increasing dramatically for ultra volatility….Hey, I think we used this type of description for Stocks back in 2006 and 2007 !!  Go figure.


Stephan Kudyba (MBA, PhD)                      THE MARKET DOCTOR


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