Monday, October 18, 2010

Since I'm Long AAPL, Looks Like My String Of Good Days Ends Tomorrow......

Most of the action today was about positioning in front of the onslaught of earnings. Strength in the dollar was putting some pressure on oil and commodity names, but that relented in the afternoon and let the indices move to new highs. Of course, optimism about AAPL was the main driving force today.

Banks acted better, but chips and retailers struggled, although breadth ended up close to 2-to-1 positive, so the bulls did a good job of staying in control.

VMW's earnings are out and were solid enough to send the stock up initially, but now it is trading down sharply as the market digests the news. The cloud-computing momentum looks like it has now died, and that means that FFIV, CRM, RVBD, RDWR, etc. are vulnerable.

IBM, which beat by 7 cents, is trading down initially on its numbers. Most of its beat is due to share buybacks.

Those are just warm-ups to the star of the show, which is Apple. The biggest problem the market faces right now is very high expectations. You can't expect a stock like IBM, which has been running up for six weeks, to keep on going unless it does something spectacular. Luckily for Apple, it is the master of low-balling guidance, and there is a big supply of folks who'd love to pick up some shares on a pullback.

Apple's numbers are out, and as expected, they are well ahead of expectations of $4.08. However, shares have sold off sharply after-hours; we'll see what happens tomorrow morning from the analyst community. Sure looks like AAPL will be down fairly significantly tomorrow - at least that's how it looks right now. Dip-buyers may come in tomorrow afternoon; we'll see......

long AAPL

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