This Apple High Cannot Last

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Includes: AAPL, DIA, QQQ, SPY
by: Markos Kaminis

The stock market, which had been drifting lower on expanding concerns about Europe and its seepage into the U.S. economic machine and the global economy, got a lift this week from Apple's (NASDAQ: AAPL) earnings report. But this Apple high simply cannot last, so I would use it as an opportunity to take some capital off the table.

The data just keeps piling on, with the latest this week showing a drop in durable goods orders, declines in consumer and investor confidence and a disturbing trend in the labor market. Meanwhile, early election results and polling is showing that political risk is rising in Europe, with potentially disruptive leaders garnering increasing support from a frustrated populace.

While the broader market is up now three days straight, looking back just a bit further shows stocks had been losing support rather readily. Study of the S&P 500 Index and the Dow Jones Industrial Average show recent highs reached on April 2nd and retracements of roughly 4% from there. Though, over more recent weeks, valuation drew some support, but came back into question as stocks drifted lower into the Apple report.

Apple's news was obviously good for Apple shareholders, driving its shares higher by 8.9% Wednesday and restoring the stock after a recent drift of shareholder confidence. But how good was Apple's news really for the rest of the market? Is Apple a good barometer for the economy? I think not, considering that much of its growth has come at the cost of rivals Research in Motion (NASDAQ: RIMM), Nokia (NYSE: NOK) and others. In other words, Apple has gained significant market share across various markets, and so its growth does not reflect the general health of the economy. It is in fact a trend breaker in my opinion, swimming like a champ against the tide, or serving like an ace on a baseball pitching staff, breaking a losing streak. Best Buy (NYSE: BBY) might be a better barometer for the economy, and its recently concerning news reflects broader retail trouble, according to one report.

Yet the stock market is on a buying binge, with the SPDR S&P 500 (NYSE: SPY), SPDR Dow Jones Industrial Average (NYSE: DIA) and the PowerShares QQQ (NYSE: QQQ) higher 2.5%, 2.2% and 3.3%, respectively, from their lows of just a few days ago. I say that given the nascent trends in economic data, including those mentioned atop this report, and not exclusive of seemingly still positive retail sales, manufacturing activity and the real estate market, this high cannot last.

From now through the first week of May (at minimum) tensions will only increase with regard to the political risk mounting against Europe. Over the course of the next week, anxiety will rise with regard to the upcoming monthly employment report, thanks partly to the latest disturbing trend in jobless claims. And the flow of economic data, including this past week's durable goods orders and consumer confidence results, continue to only support economic anxiety. So, despite Apple's stellar result, its company specific nature will be better understood soon enough. Thus, I say, now is a good time for broader market beneficiaries to cash in. Though we may see the run supported through Friday thanks to solid earnings results from Amazon.com (NASDAQ: AMZN) Thursday afternoon.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.