The QQQ is at an all time high by a long shot.
The S&P 500 is within a stone’s throw of its all time high.
The only index that people really follow that is ‘dragging it’ is the Dow Jones Industrial Average.
This is because as many of you know, the industrials have been soft.
Yes, it has MSFT and AAPL in it, but it does not have some of the other high flyers.
Now, here is something to think about when it comes to the DJIA.
Currently the biggest component of the Dow Jones Industrial Average is Apple Inc.
The stock is getting near $500, the next biggest stock is around $300.
Remember the Dow is price weighted, not cap weighted like most indexes.
It is an interesting way to manage an index, but hey, this is the Granddaddy of all indexes, I am not going to pull it aside and tell the index it is calculating itself wrong.
What’s interesting to me though is what is about to happen to the index.
With AAPL planning a 4 for 1 split at the end of the month, the index’s biggest component is going to fall to one of its smallest overnight…
…without going down.
This is going to cause the index to diverge more substantially from the S&P 500 than it has been over the last few months.
The question now…
Is that a good thing or a bad thing?
It depends if you think tech is overbought.
Does AAPL deserve a 32 PE? If they buy Tik Tok…maybe.
But what if they do not? What then?
Could AAPL be due for a slowdown?
If you look at the way stocks act AFTER a split, the answer is probably yes.
However, these last few months have been like nothing I have ever seen before.
Food for thought.
Your Only Option,
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