The Market = Apple (AAPL)

Again today Apple is resting near all time highs, near the 295 level, she has charged higher nearly 50 points since early September. Hey congrats if you were long, though i doubt many people were considering buying tops and selling bottoms is never a great way to make money in this market. (in retrospect)..Though if you are an algo with 100 million$ to throw at intra day positions of a few hundred k shares, your money.

As you may or may not know, Apple makes up 20% of the Nasdaq 100 or the NDX. NDX options are very margin intensive thus really only the big boys play in them, they also know how components of the index can move the nasdaq around as well as other index's. Bloomberg released an article this morning highlighting how Apple is like "training wheels" for the NDX. The article asks the question, how will the NDX trade if Apple was not as large of a component?

(Bloomberg) "Apple Inc.’s surging share of the Nasdaq-100 Index shows the benchmark is saddled with a stock- market equivalent of “training wheels,” according to Mike O’Rourke, BTIG LLC’s chief market strategist."

 My guess is its trend would not be parabolic and of course correlations will decrease. What makes this article interesting, Bloomberg seemed to have removed the article earlier this morning as the market was drifting, now the article is back up live as Apple is again up off day lows....

(Bloomberg writes) Apple carries more than four times as much weight as any other Nasdaq-100 stock, according to data compiled by Bloomberg. This affects the composition of one of the most active exchange- traded funds, PowerShares QQQ, which tracks the index.

Yet its stock-market value is only about 25 percent higher than that of Microsoft Corp., the index’s second-largest company by this gauge. Apple had a $267.2 billion capitalization at the end of last week, and Microsoft stood at $214.4 billion.

The Nasdaq Stock Market sets the value of each company in the index with its own calculation, combining market value and equal weighting. The so-called modified capitalization method has been in place since December 1998, when technology stocks were soaring because of the Internet bubble.

It’s time that Nasdaq “takes the training wheels off and begins to represent reality” in the Nasdaq-100, O’Rourke wrote today in a commentary. Switching to market-cap weighting would diversify the index and the PowerShares ETF and minimize any distortions from Apple’s price swings, the report said.

Posted in: AAPL,Manipulation,NDX