VIDEO: Apple Defections Could Be an Opportunity for This Holding

In today’s Portfolio Video, Chris Versace explains why we are keeping a close watch on the S&P 500’s technical setup ahead of Wednesday’s Fed policy decision and updated set of economic projections. He explains why some prudent action may be called for ahead of those Fed revelations, with Chris indicating where such moves could come from.

We also discuss Meta’s (META)  Limitless acquisition and recent headlines about management defections at Apple (AAPL) . As Chris explains, we’re watching one potential defection at Apple as it could bring an opportunity for one of our holdings. And this EPS Diplomat’s holding is joining the S&P 500, a nice validation point for the strategy, which has been performing rather nicely since becoming part of the Portfolio. 

At the time of publication, TheStreet Pro Portfolio was long AAPL and META.

Transcript

CHRIS VERSACE: Hey, everyone, Chris Versace here. It's Monday, December 8. And as you can see, I'm not in my usual location. I've got some unexpected travel. And it's not really going to derail us for the most part today. But I wanted to make sure that I got to speak to you to kick the week off because there is some important stuff going on this week. As we know, we do have the Fed meeting. The wide expectation is the Fed will deliver a rate cut on Wednesday afternoon, 25 basis points.

But as we discussed with you last week and really emphasized in Friday's weekly roundup, from our perspective, the two things that are going to be most important are going to be the comments that Fed Chair Powell makes, the language, the tone, but also what we see in the Fed's updated set of economic projections.

Now, as we think about that, the Fed back in September only saw one rate cut. The market currently sees somewhere between two, possibly three rate cuts in 2026. So there is some discrepancy here. And this is where we have to be a little careful. I say that because as much as we've enjoyed the market's rebound over the last multiple trading sessions, the reality is that the S&P 500 is now less than 1% away from its all-time high. That same move has also placed the S&P short range oscillator near 5.8% coming out of the trading last week.

Why is that important? Well, when the short range oscillator passes through 5, it tells us that the market is overbought. Is it extremely overbought? No, I mean, the oscillator readings not 8, 9, something like that. But it's passed through 5, which tells us that expectations are running high. At the same time, the S&P 500's relative strength index or RSI, it's still not flashing overbought. So it's not an overbought condition from that particular metric.

What this tells us is that we're going to want to be carefully watching the market today, tomorrow, even Wednesday morning to see if it becomes overbought on multiple metrics. We do know that with the market in an overbought condition, expectations are running high. This tells us that, if for some reason, the Fed, Powell delivers something that's a little underwhelming relative to the market, we could see the market give back some of its recent gains. So for that reason, we are going to be very carefully, prudently watching the market set up today, tomorrow, even Wednesday morning.

If we see it move deeper into an overbought condition, if the RSI level moves into an overbought condition, what does that mean? Well, we're likely to do some prudent moves with the portfolio. This could be us trimming back a position size that moves past 4.5%. Remember, we're watching Morgan Stanley, which is very close to that. We're also watching Bank of America.

We could also do some trimming where a position is itself in an overbought condition. As of right now, the only position that really falls into that is Google. And we recently took some chips off the table. So don't really see that happening again. The other one to watch though is Morgan Stanley. So if this one moves into an overbought condition and the position size is over 4.5%, odds are it's a heavy, heavy candidate for some prudent action as well as locking in some, let's be honest, some very big gains.

So we're going to continue to watch those factors and make any moves as needed. What we would be doing is potentially increasing our cash position should the Fed deliver something disappointing. That could give us an opportunity to put some cash to work at better levels.

Now, while we wait for that, let's talk about some other news that has been breaking. First, Meta has acquired an AI startup, Limitless. And this is in keeping with Meta's efforts to deliver-- sorry, develop AI-enabled wearables. Not much of a big surprise. Remember, this kind of dovetails with the comments last week that Meta was cutting headcount at its Vision Quest area-- sorry, not Vision Quest, but at its Metaverse unit. Sorry for that. So this is more in line with that telling us that the greater focus is going to be on wearables. That's actually a nice positive for our position in Qualcomm. Remember, one of the growth areas for Qualcomm is in the IoT market. And the wearables category fits in that.

I also want to talk a little bit about Apple over the weekend. You probably saw some headlines about some management defections, some going to Meta, some potentially leaving. Now, here's the thing. We know that Apple has a deep bench. But the one area that I would be a little more concerned with would be if Apple's chip architect departs.

Now, why? Well, there has been a lot of capabilities that Apple has been doing in with its own chipset for the iPhone, for the Mac iPad. But the one area, as it relates to us, that we've got to be extremely mindful brings us back to our Qualcomm position because Apple has been leaning into its own baseband chipsets for the iPhone. And we know that over time they're going to replace Qualcomm. This is a known thing. It's not really likely to happen in much more in 2026, but really 2027, 2028. That's why Qualcomm has been hell bent on this diversification strategy that we've been talking about.

But to the extent that this chip architect leaves Apple, that could be a bit of a setback for this. So it's going to be something we want to watch, A, for what does it mean for Apple? But B, is it an opportunity for Qualcomm? And remember that we're on, not the near-term cusp, but before too long, we are going to see the wireless technology transition from 5G to 6G. Qualcomm has an extremely competitive position in that marketplace, big on the IPR patents for that and the other technology development. And remember, everything has to be backward compatible. So, we're going to want to watch this carefully. It could be an unexpected opportunity for Qualcomm. More on that as it develops.

And I wanted to close today's video talking about our EPS diplomats model. Which you've probably noticed, it has been a champ for us since we started that strategy on November-- on November 17. And today, one of its residents, Comfort Systems, ticker symbol FIX, is being added to the S&P 500. Now, on the one hand, that is going to bring some additional demand for fixed shares, which of course, is going to help lift the share price in the near term. But the addition to the S&P 500, I would just say it really supports some of the things that have gone into our crafting the EPS diplomat strategy. That, of course, makes us feel pretty good.

Now, when I started today's video, I mentioned that we wouldn't be derailed for the most part. Well, the one area that we're going to be affected is with today's office hours. So we're going to move them to Wednesday. We'll have them after the market close from 4:00 PM to 5:00 PM Eastern in the forum. And this time, this time, I promise that I won't forget. My bad on last week. I got very deep in the weeds on some Marvell and Amazon comments. But you have my word, we will be holding office hours this week and next week before things really start to slow down with the Christmas holiday and other year-end holidays.

So that's today's video. What I would say is, given all that we've discussed and what's ahead this week, including quarterly results from Costco. We'll also want to lean in to what Broadcom has to say and several others. It's going to be a busy week. Be sure to check your emails, your alerts. We'll get you through it. And if we make any moves with the portfolio, including one or two that I might have alluded to in today's video, we want to make sure that you are right there with us. Thanks for watching.