Although Apple's stock price decoupled from the broader market several months ago due to idiosyncratic factors specific to Apple, I believe that any further downside for the stock will serve as an indicator of more widespread worries about sales growth and profit margins for the stock market as a whole.
The importance of Apple does not merely arise from the huge weighting (about 5%) that Apple's EPS represents in the overall EPS for the S&P 500
The situation with Cirrus'
But troubles with Apple will merely serve as a psychological trigger that will likely prompt many investors and traders to examine the deteriorating fundamentals in other sectors besides technology.
For example, as a result of the ongoing crash in commodities prices, the EPS estimates of the entire basic materials sector of the S&P 500 are going to be have to be revised drastically lower. And the entire energy complex which has a huge weighting in the S&P 500 (about 11%) and ETFs such as Energy Select SPDR
Consumer discretionary stock prices and ETFs that follow this sector such as Consumer Discretionary Select Sector SPDR
A variety of key leading sectors are either testing or breaking through their 50 day moving averages. The Dow Transports
All of this suggests a garden-variety stock market pull-back developing that should ultimately take stocks down to the 1475 to 1500 level on the S&P 500. A major exogenous shock would probably be necessary to propel a pull-back beyond this level. We are still in a cyclical bull market and most intermediate term macro-fundamental and technical indicators remain quite strong.
At the time of publication the author held no positions in any of the stocks mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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