Let’s connect three dots:1) AAPL shares had a mini-crash this morning, losing $15 right at the open, on more volume that AAPl normally does in an entire day. It appears like this sudden drop was sparked by just the rumour that Apple’s COO was leaving the company. (Which COO Tim Cook has now denied.)
2) AAPL now has a ridiculous 20% weighting in the most popular Nasdaq ETF, the Powershares QQQ Trust ETF (QQQQ).
3) The Nasdaq itself tanked at the open today.
Draw a straight line and it’s obvious that a major Apple surprise would be enough to tank the entire market.
Just look at what this morning’s AAPL mini-crash did to the Powershares Nasdaq ETF (QQQQ). QQQQ had its own mini-crash on high volume this morning:
It just followed Apple’s performance:
That’s just a broken ETF you say? It’s not the real market? Well, the actual Nasdaq had its own sudden drop this morning as well:
Now, there are valid reasons to believe Apple shares may still be cheap, if it can keep delivering outstanding growth, given that its valuation is pretty reasonable relative to peers.
But Apple shares were at $200 just in February, 30% lower than where they are now, and business was still extremely good back then.
Hence it’s not hard to imagine how a major mis-step or negative surprise on the part of Apple could send APPL shares back towards $200. They could report far less growth than investors expect, botch a product launch, or even have a major change in top level management, as was the fear this morning.
Note how the most popular Nasdaq ETF reacted sharply today to just a $15 dollar drop. If a real piece of bad news came out, then guess what a $90 drop in AAPL would do to this ETF given Apple’s 20% weighting. Then note how the entire Nasdaq dropped this morning.
If the Nasdaq were to drop hard one day due to Apple, do you think the S&P500 would just sit around?
Thus it’s as if everyone should be rooting for Apple’s continued success right now.
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