The day started off slow but grew very ugly by the close. The bulls had no energy, and traders decided that if they can't take them up we might as well take them down. The dip-buyers who did such a nice job of supporting us for so long back in April and May are nowhere to be found now as we crack some important technical support, such as the 50-day simple moving average on the Nasdaq and the 200-day on the S&P 500.
Breadth was solidly negative with all major sectors in the red by the end of the day. Most troubling was that the bigger-cap momentum names were particularly weak. Names like GS, AAPL - see below, RIMM, ICE, FSLR and BIDU acted very poorly. Volume wasn't particularly heavy, but that may be offset by the technical levels that are being breached.
This is looking like a full-blown correction now, and the trend is definitely turning down. What that means is that bounces and strength are likely to be sold and that that dip-buyers will only be in for quick flips.
Is defensive action needed? Possibly, but I'm sticking to my major long positions - GGWPQ.PK, AAPL and BAC. This market may be changing character now, and the one thing we know from the rally off the March low is that trends can last a lot longer than you think they will.
As for AAPL, I'm still seeing good news out there - regardless of what the stock is doing at the moment. Analysts seem to be feeling bullish ahead of the June quarter results. Sell-side analysts are taking a fresh look at their estimates for AAPL ahead of the upcoming announcement of financial results for the fiscal third quarter ended June. And the pundits like what they see:
* BMO Capital analyst Keith Bachman this morning asserted in a research note that Apple should be able to maintain gross margin in the 34%-35% in the September quarter despite recent price cuts, thanks in part to a richer mix of iPhones. He thinks the company will guide lower, likely in the 32% range, reflecting its typical caution; and he expects EPS guidance as usual to come in below the consensus. He figures they will forecast $1.05 to $1.15, below the Street at $1.28. That said, Bachman today lifted his EPS estimates for FY 2010 to $6.10 from $6 on a GAAP basis, and to $7 from $6.75 on a non-GAAP basis. His new target is $152, up from $150.
* Cross Research analyst Shannon Cross today lifted her EPS estimate for the September 2009 fiscal year to $5.63, from $5.46; for FY 2010 she goes to $6.13, from $5.73. For the June quarter, she sees sales of 2.5 million Macs, 4.9 million iPhones and 10.8 million iPods. Cross sees sales in the quarter of 1.4 million Mac notebooks, down 4%, less than an estimated 8% for notebooks overall, with desktops down 4%, versus an estimated 14% drop for the overall PC desktop sector. For the June quarter, she now forecasts $8.4 billion and $1.20 a share, up from $8.24 billion and $1.16.
* Piper Jaffray analyst Gene Munster today writes that he is “increasingly confident” in his June quarter forecast of 2.2 million Macs and 5 million iPhones. He reports that there is a 7-10 day lead time for the new lower-priced 13-inch MacBook Pros on the company’s online store, the longest wait in over two years.
* Barclays Capital analyst Ben Reitzes today repeated his Overweight rating and $173 price target on the stock. He notes that Apple retail store availability for the 16 GB version of the iPhone 3GS remains low; he also noted that MacBook Pro lead times lengthened this week, and that “demand for these models is quite strong.”
Apple will report June quarter results on July 21.
long AAPL; GGWPQ.PK; BAC
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