How Apple’s AI Week Could Send it to New Highs
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A rare bull signal means it’s time to go “risk on”… Why the “summer slump” shouldn’t spook you… The best-performing stock in the S&P 500 for this week… Jason Bodner’s latest Quantum Edge Hotlist… Apple’s big developer event tends to bring big short-term returns…
There’s something odd about this year’s rally. Something you likely would’ve never noticed just scanning the charts.
So far this year, the S&P 500 has significantly outperformed the Dow Jones Industrial Average. At Thursday’s close, it’s outpaced the Dow by 10 percentage points over the last six months.
This has only happened 36 times since the SPDR Dow Jones Industrial Average ETF (DIA) began trading in 1998. It used to happen much more often in the ’90s, but it’s only happened four times since the turn of the century.
In the chart below of the SPDR S&P 500 ETF (SPY), the green shaded areas are the regimes when SPY outpaced DIA by 10 percentage points for more than six months:
If you asked someone 50 years ago, they might think it’s a sign of froth for the S&P 500 to get so far ahead of the Dow. The Dow’s full of prominent U.S. stocks, and for decades was regarded as the top benchmark.
These days, the S&P 500 is top-heavy with the biggest tech stocks. More than a quarter of its value comes from the top five tech names: Microsoft (MSFT), Nvidia (NVDA), Apple (AAPL), Amazon (AMZN), and Meta Platforms (META).
And to be clear, the parabolic gains in NVDA are responsible for much of this outperformance.
But regardless, is this a sign of the market getting overstretched?
Historically speaking, anyway… not even close. Whenever the S&P 500 has outperformed the Dow by 10 percentage points, it’s a boon for the markets.
SPY gains 1.7% just a week later… and it’s been positive almost 70% of the time. That’s nearly 10 times the average one-week gain of 0.18%.
Looking out six months, SPY has historically risen 6.8% on average with a 100% hit rate. That also outpaces the long-term average gain of 4.3%.
We’ve been showing you here in TradeSmith Daily that while notions of a summer slump are a historically accurate truth, they don’t mean you should run and hide. Plenty of individual stocks can – and do – perform phenomenally in this very same period.
So, whenever rare events like this S&P/Dow divergence occur, we need to look back and see what the historical facts tell us. Sometimes, they can defy the predominant investment narrative.
Right now, this rare signal is saying to buy stocks. As I write Friday morning, stocks are taking a hit on jobs data. Should that last through to the time you read this, it could prove to be a strong buy-the-dip opportunity.
But before you hit “buy,” ask yourself: “Is this the absolute best stock in the S&P 500 I could buy this week?
Let’s turn again to history for the answer…
❖ Since the turn of the century, each stock has had its week in the sun…
What if I said I can tell you, with statistical confidence, which stock in the S&P 500 has performed the best this very week – June 10 through June 14?
Once again, our capabilities here at TradeSmith make it not just possible, but simple.
Let’s go back and measure the performance of every stock in the S&P 500 for this week going back to 2000.
Let’s also do a little filtering, to make sure that a few odd years of abnormally high returns don’t skew the result. We’ll also narrow the field to stocks with a win rate that’s high enough (over 70%) to be confident in our trade.
Here are the results of the study… with a surprising top entrant. Far and away the winner is Enphase (ENPH):
| Symbol | Avg. Trade | Win% |
|---|---|---|
| ENPH | 5.8% | 81.80% |
| VRTX | 3.3% | 70.80% |
| INCY | 3.1% | 70.80% |
| DVA | 2.9% | 70.80% |
| ALGN | 2.4% | 72.70% |
| NOW | 2.2% | 72.70% |
| AMGN | 2.2% | 70.80% |
| MSFT | 2.1% | 79.20% |
| LH | 1.7% | 70.80% |
| DUK | 1.6% | 70.80% |
Though ENPH has only has 12 years of trading history, this large-cap solar stock tends to trade 5.8% higher this week with a win rate of almost 82%.
For a stock that covers the full study period, let’s look at Vertex Pharmaceuticals (VRTX). It’s risen 3.3% on average this week for the past 20 years, with a near 71% win rate.
And these stocks aren’t alone. Plenty of other tickers on the list above have impressive performance this week – even if some of them are younger names.
Keep an eye on them… or be bold and trade them higher to capture the next five days of historically market-beating gains.
❖ It’s time to take a look at Jason Bodner’s Quantum Edge Hotlist…
Every week in Quantum Edge Pro, Jason shares his Quantum Edge Hotlist with subscribers.
It contains the top- and bottom-ranked stocks as determined by his Quantum Edge score – a proprietary measure of fundamental and technical factors, and institutional buy and sell signals.
Let’s see what’s on last week’s list…
We have to notice the consistent presence of GOOGL. It’s been in the rankings for about a month now, and that’s significant. Clearly, GOOGL has managed to put its AI controversies behind it and attract institutional capital.
We’re also seeing lots of tech concentration in the top list. Computer hardware, semiconductors, communications, and data storage companies are all making the list alongside a couple of odd ducks – Royal Caribbean and First Solar.
Rounding out the bottom of the list are more chemical manufacturers, another consistent theme, and biotech, which we’ve also seen before.
Quantum Edge Pro subscribers get the newest list every Monday afternoon, with this week’s list coming in just the next few hours.
And speaking of ultra-popular tech stocks…
❖ Apple’s big developer event is this week…
Every year around the start of June for the past 20 years, Apple has brought together its developers to demonstrate the company’s biggest breakthroughs at the Worldwide Developer’s Conference.
These conferences are often packed with announcements of Apple’s more nitty-gritty tech innovations. But it’s also where it announced the App Store and the tools to develop apps for iPhone. It revealed the iPhone 4 there. It also announced a partnership with Intel (INTC) to produce chips for Mac… then, 15 years later, it broke up with Intel at WWDC as well.
And these partnerships may be the most important trading catalysts to come out of WWDC…
If you caught yesterday’s guest essay from Luke Lango, senior analyst at our corporate partner InvestorPlace, you already know that many expect Apple to announce its big AI project this week.
And Luke thinks Apple may publicly announce a partnership with a little-known, small-cap company to supercharge their AI efforts.
Apple’s taglines for the event can be legendary, and this year’s is “Action Packed” – which, frankly, could mean anything. But it suggests Apple is ready to deliver something exciting.
That may be enough to drag the stock out of the mud. AAPL has gone almost nowhere for the past year, likely due in part to its lack of a big AI product to tout.
But I got to wondering – if WWDC is such a big deal, does it have a historically “big deal” impact on the stock price?
WWDC has run for four days between June 2 and June 28 every year since 2003 (except 2006, when it went from Aug. 7 to 11).
So, I went back and checked what the average return would be if you bought AAPL stock throughout those June dates for the past 20 years.
Turns out, it’s an extremely high-odds trade. By holding AAPL stock through a four-day period during this range of days in June, you earn almost 3.6%. And the trade is positive more than 71% of the time.
Statistically speaking, this month is a great time to own AAPL stock. And with the share price so close to a new high, it’s likely that this week’s event will boost the stock to break out of the trading range it’s been stuck in for a whole year:
The odds are on your side to bet on an AAPL win this week, taking the stock to new highs. Especially with the bullish signal in the broader S&P 500 itself.
To your health and wealth,
Michael Salvatore
Editor, TradeSmith