Beauty is Only Skin Deep [5:39m]: Play Now | Play in Popup | Download (215)

Is there anything in the tech world more beautiful than the new Apple MacBooks? And the beauty goes way beyond the unibody design, with it’s rock solid feel and streamlined design. And the multi-touch trackpad that doubles as a button is shear brilliance. Inside it’s a triumph of engineering, simple yet elegant, and yes, truly beautiful. Yup, the MacBook is beautiful inside and out.

You know what else is beautiful? It’s when I hear that Apple could meet or beat last quarter’s record 2.6 million Mac sales total, and sell more than 6 million iPhones this fiscal quarter. This is according to Piper Jaffray analyst, Gene Munster, in a research report released on Monday.

This is why I love this company so much. In the face of dire economic straits, where many retailers are expecting their worst holiday season ever, Apple will continue to break sales records and generate revenue. Apple’s success goes way beyond cool products, it’s ingrained into their DNA, their philosophy, from their attention to detail and the balance they achieve between form and function, to the unparalleled experience you get an an Apple Store. Apple is beautiful inside and out.

You know what else I find beautiful? Triumph in the face of diversity. When there are insurmountable odds stacked against someone, and they find the will, the desire to overcome those odds to become victorious. It speaks volumes, not only of the triumphant event, but also of the character of the individual. It’s a beautiful thing inside and out.

Well, perhaps this is a stretch, but I saw that kind of triumph today in the markets. The Bulls were all but counted out. The Bears had them over the coals, on the brink of disaster. Pinned below the critical support level of 839, it looked like the Bulls were down and out. Had the S&P closed below the old closing low of 848, would have been bad enough, but to close below critical support would have been the death blow, and opened the door to sinking to the 2002 bear market lows.

But the Bulls made a remarkable comeback and rallied into the close, plotting a fine bullish hammer, and broke a five session streak of declines. On the surface this was as beautiful as beautiful can get. But upon closer inspection, there’s a lot of ugliness under the covers.

One of the problem was a lack of participation across the board. The Dow was clearly the leader, advancing nearly 2% after being down by just as much. And the S&P had a great reversal as well, finishing up 1%. But the Nasdaq finished flat. Sure, it had a very good reversal, but failed to deliver in the end. And it’s the growth-heavy Nasdaq where you would expect reversals like this to emanate.

But the real ugliness was even deeper. Now I’ve talked many times about the importance of confirming strong market moves through the performance of market internals. And that’s measured by the advance-decline line, the ratio of advancing issues to declining issues. And like most hard moves down, the advance-decline line was dismal, with decliners outpacing advancers by more than 3 to 1. Then the market reversed and the rally ensued, and normally you would expect the advance-decline line to reverse as well. But it didn’t. The Naz and the NYSE both finished up with decliners still well ahead of advancers by 2 to 1.

Let’s add to this ugliness. The Volatility Index (the VIX, also known as the Fear Index) peaked today to 73.13, breaking the 70 barrier for the first time in 3 weeks. It retreated into the close, but we’re still just below 70! A VIX at this level makes it very difficult to trade stocks because price movement can be violent with this kind of volatility.

So while this reversal was beautiful on the surface, and it may open the possibility of a rally, there is some serious ugliness underneath. And with the Fear Index at these incredible levels, the market is moving on pure emotion. So, as enticing as the reversal was, the poor internals and the fear offset the beauty. And in my opinion cash is the most beautiful thing of all!