There’s A Problem With AAPL

On Monday AAPL begins trading with its new post split price of 125 dollars a  share.

This will affect more than just the stock holdings of AAPL shareholders.

For instance, in the Dow Jones Industrial Average, AAPL will fall from the biggest component of the index, to about the 17th biggest.

This is important for several reasons.

Let’s start with the Diamonds (DIA), this is one of the most actively traded ETF’s out there after the SPY and the QQQ.

DIA is going to have about 15 million shares of AAPL to sell at some point, likely on the open.

It is also going to need to spend those dollars on its other holdings.

In turn, the DIA which has already VASTLY underperformed the S&P 500 will see its tracking the SPY completely change.

Historically, the SPY and DIA have had somewhat similar returns.

This has not been the case this year:

AAPL is the largest component of the S&P 500.

Many people believe that AAPL is a little over stretched.

If AAPL takes a dive, it will now affect the SPY and the DIA in completely different ways.

On Friday, and AAPL tanking would have killed the DIA AND the SPY

On Monday,  that will no longer be the case.

So:  If we continue to get more good news on industrials, and names like MMM, PG, GS, and UNH rally….

…while the ‘covid tech’ names get crushed…

Is the DIA now finally set up for the big ‘catch up’?

I think the answer is a clear yes.

Your Only Option,

Mark

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