Apple and the S&P 500

 I'll begin tonight's post with a quote from Dr. Marc Faber who was recently interviewed on Bloomberg. He had this to say about about the U.S. stock market:

"I think you may recall that last October, in November again and in December I was reasonably positive for equities because the sentiment of investors was very negative and inside selling had diminished and the market was oversold. But right now investor sentiment, if anything, is rather bullish, the market is overbought and insider selling is very high. The technicals have deteriorated in the sense that in this latest rally, in the last two weeks, the number of new highs has diminished significantly. I think we are at the beginning of a more meaningful correction. The market is being driven by very few stocks at the present time...the economic sensitive stocks are not confirming that advance, and not confirming the extremely positive sentiment about the United States economy. I would very careful here and I would take some money off the table."  

As I discussed here last week, the NASDAQ composite and the S&P 500 have been lead by AAPL, which has recently powered through $600/share:

To be honest, I have watched this parabolic rise with envious disbelief. I see no negative divergence here in the RSI, or the MACD -- I don't know when this parabolic move will end but I certainly wouldn't want to go short this stock. 

 It has been overbought for a good two months now, but one can argue that the company is cheap on a P/E basis, as Barry Ritholthz did recently. 

An on-the-floor trader I follow on twitter, @dontfademe, summed AAPL up best this morning (left -- taken from my iPhone, of course). Fortunately, I am smart enough to have never tried to sell-short AAPL, but at the same time I was never smart enough to go long of it either. I remember roughly two years ago, when AAPL was trading with a 2-handle, I thought the run was over. When my own father asked me what I thought of AAPL a year ago, I dismissed it off-hand. I thought I had missed the party completely. Have I missed it now? I don't know, but it is hard for me to imagine this stock powering higher every single day without an extended period of consolidation at the very least. I think this chart and the chart I'm about to show hint at the the point Dr. Faber was making in his interview. Have a look at the following:

There is a quite a bit going on in this chart. First, in the top panel is a daily line graph of the S&P 500. Below that is the S&P 500 A50R, which is simply the percentage of stocks within the index about their 50 day moving average. In regards to Faber's point about the market being driven by very few stocks (AAPL affect) and the lack of economic sensitive stocks confirming the advance -- I think the above charts shows this in stark relief. The S&P 500 has recently made new post-financial crisis highs, but the number of stocks within the index about their 50 day moving average peaked in October. The S&P 500 A50R itself has negative divergence in the MACD histogram. Usually, Dr. Marc Faber is correct in his shorter-term calls and I think this chart supports his opinion.