Last week’s market drivers were twofold for the most part, Apple (NasdaqGS: AAPL) and the Fed. AAPL fell sharply to begin the week after gyrating over the past several weeks after hitting an all time high of $644.00 a share earlier in April.

The S&P 500 closed Friday above the closely watched 1,400 level but the blue-chip index was set to open the week lower.

In fact, the situation looked grim prior to AAPL’s anticipated earnings release mid-week last week, as the stock traded as low as the $560s range and dipped below its 50 day moving average for the first time since last December. Nevertheless, AAPL posted strong numbers and the stock immediately sprung to life to finish the week with a good showing, and having an influential weighting in several major indexes and index products currently (AAPL is a 17.52% weighting in the Nasdaq 100 PowerShares QQQ (NasdaqGM: QQQ), a 4.37% weighting in the S&P 500 (SPY/IVV/VOO), and a 18.71% weighting in the S&P Technology Sector Index (NYSEArca: XLK) for instance, significant stock moves in AAPL alone are enough to potentially “move the market” these days.

AAPL’s strong numbers coupled with benign comments from the Fed lifted equities out of a two week hangover to resume 2012’s uptrend, with the SPX (S&P 500 Index) closing above 1400 (1403.36) on Friday. Our market technician David Chojnacki had noted the “range bound” technical characteristics of the equity market in recent notes and pointed to a market that was struggling finding direction in an area of “limbo”, but last week we saw some evidence of strengthening technicals to finish the week. Areas that had provided technical resistance including 1380 and 1388 in the SPX were surmounted with ease post AAPL’s earnings release, and having tested its 50 day moving average on several occasions in the past few weeks and successfully bouncing each time, the SPX seems to be on solid footing once more and may be able to make a near term run at its high of 1422.38 that was touched in early April.

Reflective of the “risk on” dynamics of the late rally last week, the VIX plunged from the 20s well down to a $16 handle as institutional investors began to unwind protective put positions in some cases that were likely established prior to the AAPL release and the anticipated FOMC comments. Interestingly however, iPath S&P 500 VIX Short Term Futures ETN (NYSEArca: VXX) saw impressive net inflows last week as the fund reeled in more than $250 million despite the price action in the VIX index and the VXX product itself.

Potentially, institutions are using the drop in the VIX as an opportunity to establish volatility hedges going into the late spring and early summer months. SPY led all ETPs in terms of inflows, taking in about $1.2 billion in assets, as it is a popular and easily accessible instrument for managers whom want broad benchmark exposure to utilize in a “pinch”, especially as the SPX crossed key technical levels late last week to the upside. IWM ranked #2 on the inflows list, taking in about $700 million via creation activity, and recall that last week SPY and IWM saw the most outflows in absolute terms.

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