Equity markets ended roughly flat on Tuesday as a surprise drop in U.S. consumer confidence numbers offset positive economic growth figures.
U.S. Q3 GDP came in much higher than expectations at 3.9% – versus the 3.3% analyst expectation and the 3.5% figure from Q2.
However, most traders ignored this backward-looking figure as the S&P 500 Index pared earlier gains to finish the session down -0.12%.
Meanwhile, Apple (AAPL, Financial) shares took some of the headlines after the electronics giant became the first U.S.-listed company to have a total market capitalization in excess of $700 billion.
Apple shares gained around 1% during the day to hit a high of $118.77. However, shares then reversed and the stock ended the session lower by 0.9%, finishing the day with a total market cap of $689 billion.
Now that the $700 billion marker has been taken out, a closer inspection of Apple shares shows them to be relatively expensive at the present time.
Although I believe Apple to be an extremely sound company, and a perfect investment to take advantage of many long term global trends, the stock has now gotten ahead of itself.
Investors are therefore urged to take their profits at this point and wait for a more favorable entry.
Financial condition
According to all my financial tools and indicators, Apple shares are no longer cheap like they were in January, when I urged investors to take advantage of the opportunity.
Back then, Apple shares traded at just 13 times price to earnings whereas they now trade at 18.50. Current ratio has dropped to 1.08 which is OK but well below the level that Apple investors are used to. PEG is decent at 0.60 but if we use other conservative measures such as future analyst growth the PEG ratio moves closer to 1.60.
Insider selling
More importantly, though, there has been a lot of insider selling of Apple shares lately which is not surprising given the big run-up that we've seen.
Andreas Halvorsen (Trades, Portfolio) is sold out while David Tepper (Trades, Portfolio), George Soros (Trades, Portfolio) and David Einhorn (Trades, Portfolio) have all reduced their holdings.
Overbought
Apple shares are now 16% above their Peter Lynch earnings chart and overbought on most timeframes. On the daily, weekly, weekly and monthly chart, Apple has extended through its typical upward resistance lines meaning there is very little room left for it to continue.
The key daily RSI reading is overbought at an extreme level of 77 while shares are nearly 30% above their 200 day moving average.
This is prime territory for a pullback and Apple is showing all the signs of nearing a market top here. Investors should not seek to purchase any more shares at this time and would be advised to reduce their holdings like many of the market gurus have done.
Waiting for the stock to fall back to $95-$105 area is a better strategy for those who want to get back into Apple shares.
