foxex: Fears Nag Investors as Stocks Reach High-Water Mark

Friday, September 13, 2019

Fears Nag Investors as Stocks Reach High-Water Mark

Chart Advisor | Focus on the Price

By Gordon Scott, CMT

Friday, September 13, 2019

1. Volatility remains elevated as S&P 500 Hesitates at Historic Highs

2. Goldman Heckles Apple TV Accounting

3. Software Industry Oddly Not Participating in Recent Rebound

Market Moves

Market action brought the indexes to nearly match old highs this week only to see prices fading away from those highs as the trading came to a close for the week. In the midst of traders trying to find enough courage to buy at all-time high prices, the Volatility Index (VIX) shows that traders are still reflecting on their fears of falling prices as they pay for market insurance in the form of call and put options.

The VIX has moved lower recently to reflect the rise in prices, however another ETF, VXZ, which tracks the 90-day forward-looking futures on the VIX index, remains unusually elevated. Commercial traders who use these instruments appear to be factoring in the possibility that something may roil the markets in the next month or two—most likely events associated with U.S.-China trade negotiations. This nervous disposition is also reflected within investor behavior on individual stocks.

Goldman Heckles Apple TV Accounting

Goldman Sachs analysts reported their opinion today that Apple's (AAPL) plan to account for its new Apple TV+ product may have a material negative impact on the company's quarterly results. They predicted a hefty 24% drop is possible in share prices. The key problem, the analysis contends, is that the company plans to count the free trial of its Apple TV+ product as a discount off hardware purchases.

The analysts contend that because the service will be offered free for one year after they purchase new Apple hardware like an iPhone or iPad, it will amount to a $60 discount off the average selling prices of these items. This discount will in turn create lower profit margins. Apple published a contradictory rejoinder during the day as if to say "investors will be smart enough to figure out what's going on." Goldman had no comment. Meanwhile the stock retreated from its highs similar to way the indexes did, leaving investors to wonder who is right about the issue.

Gig-Economy Stocks Rally Amid Passage of California Bill

Bulls in Control Ahead of Adobe Earnings

Software Industry Oddly Not Participating in Recent Rebound

Software stocks have had a good year, and with Adobe (ADBE) about to announce earnings, investors might be interested to see what gains could be made in the fourth quarter. However, that sentiment might be better off delayed for a little bit. Investors might want to consider the price pattern being made by a software-industry-tracking ETF (IGV).

This chart shows price weakening along an upward trend. Like a low-flying jet riding just above tree tops, this issue wouldn't take much of a drop to send it crashing down. Adobe's earnings report could be that catalyst. For all anyone knows the company may have great news and investors might lift the stock higher. However if not, its fall could be precipitous enough to weigh on many other industry members as well.

The Bottom Line

Markets back off their nearly historic highs as traders and investors alike show underlying fears of sliding prices. Apple investors have multiple reasons to be concerned. Software stocks look vulnerable, just as Adobe is preparing to report earnings in the upcoming week.

How can we improve the Chart Advisor? Tell us at chartadvisor@investopedia.com