In my view, the market internals have looked horrible in the last several trading sessions, and if you’re not concerned about it, that’s fine.
In my opinion, though, don’t be surprised if the market starts to falter should the share prices of Apple (AAPL) and Tesla (TLSA) start to falter.
In my view, you can see this dynamic when you compare the NASDAQ 100 ETF (QQQ), to the NASDAQ 100 Equal Weight ETF (QQQE). Or consider what happened on July 30, when Apple announced its stock split, or on August 11 after Tesla unveiled a similar move.
We can see the divergence which both occurred during the next trading session.
Market Breadth
Also, in my opinion, investors should pay attention to the fact that the number of stocks in the NASDAQ 100 trading above their 50-day moving average is falling, which is a sign of much of the index losing momentum.
Also, in my view, these two stocks have a big influence in the direction of the overall market.
Apple had a 13.8% weighting in the NASDAQ 100 (QQQ) as of July 31, which is up from 11.2% on May 31. Tesla accounted for 2.4% of that index’s weighting as of the end of July.
Takeaway
Both certainly have even bigger weightings as August draws to a close, given their stocks’ explosive growth in price in recent weeks.
In my opinion, as long as Tesla and Apple keep going up, good things may happen to the broader indexes.
If they pause or should start to fall, then the market is likely going to struggle.
Photo Credit: Neils Epting via Flickr Creative Commons
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