BIG Week for Apple - Catharsis?

George Brooks |

The big news last week came from House Republicans who said they would consider agreeing to a 3-month debt-limit increase without demanding spending cuts in exchange. The House will vote tomorrow, January 23 to extend the debt limit to May 19 contingent on Congress passing a budget resolution by April 15 for the next fiscal year.

Reportedly, if either the House or Senate fails to pass a budget by then, pay for the members of that chamber will be withheld in an escrow account until one is passed Instead, they will use a January 23 vote to try to force Senate Democrats to adopt a budget to spell out their spending plan.

Brinkmanship over raising the debt ceiling taking the U.S. to the edge of default was at the heart of my expectation for a correction in Q1.

Such brinkmanship over this issue triggered an eight day, 12% plunge in stock prices in August 2011. A repeat performance would undoubtedly adversely impact stock prices this time around.
However, without this crisis, stocks are freer to run.

I have to assume the U.S. House WILL vote to extend the debt limit and avoid a crisis, we will know tomorrow.

BUT beware, there are no guarantees. We are in a news-whipsaw market, just commentary from any government official to the contrary will trigger a sell off.
Beyond the debt ceiling issue, we have the prospect for automatic spending cuts (sequestration) to deal with, and that will generate significant uncertainty.

TODAY:
Mixed at the open. Near-term support is DJIA 13,530 (S&P 500: 1,472), Market looks higher.
DJIA: 13,649.70
S&P 500: 1,485.98
Nasdaq Comp.: 3,134.70
Russell 2000: 892.50
Tuesday, January 22, 2013 (9:15 a.m.)

BIG WEEK EARNINGS:
Q4 reports for the S&P 500 are now expected to come in on average at plus 3.8%, up from recent projections for a gain of 2.5%. Of the 67 S&P 500 companies reporting so far, 72% have “beat” Street estimates, but realistically, I suspect a lot of those were low-balled in the first place.
Apple (AAPL), Google (GOOG), IBM (IBM), Microsoft (MSFT), Johnson & Johnson (JNJ), 3M (MMM), and 80 other companies report this week

BOND MARKET:
I was premature in my earlier forecast that the long-term bond bubble would burst, but now feel it has already begun with a top traced out between July and December. U.S. Governments were in demand as a refuge from international chaos. As the tensions from European sovereign debt woes abate, money will flow out of safe havens and into stocks where a better return is hoped for. The short-term bonds are obviously not the problem, but long-term bonds are vulnerable.

APPLE (AAPL: $500.00) - BIG week for APPLE !!
AAPL’s Q4 earnings are scheduled for release on Wednesday Jan. 23. This is a defining moment for AAPL. It has had persistent sellers since mid-September. If its Q4 report disappoints, a drop to the mid-400s is possible.

But, I have read a lot of positive and negative conclusions about AAPL’s outlook. The key is, have the negatives been discounted by its 30%, four month plunge? If not, how much further does it have to fall to fully discount the negatives ?

We had high volume rebounds in November, December and earlier this month only to be reversed by sellers. There was buying in the final hour of trading Friday, but that may have been related to option/futures expires. (Note: these expire every months, the more publicized ones, the “Quad Witching” expires occur on the third Friday in March, June, September and December)

CONCLUSION – APPLE:
I sense a buying opportunity, and it could come immediately or following a momentary sell off below $490, kinda a shake-rattle, then roll. When it comes, I see the turn good for 35 points in one day.
I do not own, nor am I short Apple’s stock.

FACEBOOK (FB - $29.66): Resistance starts at $30.33. Near-term support is now $28.77, but continued strength in the overall market may be all it takes to reverse FB’s recent slippage. The stock was hit recently by an announcement that it had lost 1.4 million active users and by news of its introduction of Graph Search, which facilitates users’ search through connections for various items of interest.

FB has some 167 million users in the U.S., and 1 billion worldwide.
I don’t own, nor have I ever owned FB. Generally, I don’t recommend or comment on individual stocks. I started covering FB technically after its IPO because on May 21. I felt at $34 it was very vulnerable in face of all the misunderstanding and hype. I warned of a drop to $24-26, which it did shortly thereafter. Following a rally back into the 30s, FB dropped into the low 20s where on August 2, I forecast a low of $16.88. On September 4, it hit $17.55, its low since its IPO at $38. I’ll continue technical coverage for a while to accommodate readers.

As for Apple, well it is a big-name stock that got shellacked in a short period of time, I wanted to help out targeting a bottom as with FB.

ECONOMY:
Note: The Fed’s Beige Book, a business summary from all Federal Reserve district banks, sees modest or moderate growth in all 12 districts. I am going to list the economic reports below but will not include the numbers from the last report, since those numbers are often revised significantly and therefore potentially misleading.

I suggest you access the website: www.mam.econoday for details reports on this week’s calendar and an excellent recap (plus graphs) of last week’s reports.

TUESDAY:
Chicago Fed National Activity Ix. (8:30)
Existing Home Sales (10:00)
Richmond Fed Mfg. Ix. (10:00)

Wednesday:
FHFA House Price Ix.(9:00)
THURSDAY:
Jobless Claims (8:30)
PMI Mfg. Ix.(8:58)
Leading Indicsators (10:00)
Kansas City Fed Mfg. Ix.(11:00)

FRIDAY:
New Home Sales(10:00)
Consumer Sentiment (9:55)
George Brooks
“Investor’s first read – an edge before the open”
sensiblesleuth@gmail.com

……………………………………………..
The writer of Investor’s first read, George Brooks, is not registered as an investment advisor. Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. Readers are expected to assume full responsibility for conducting their own research pursuant to investment decisions in keeping with their tolerance for risk.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
AAPL Apple Inc. 112.71 -1.91 -1.67 52,481,151
GOOG Alphabet Inc. 786.90 -0.31 -0.04 1,411,937
IBM International Business Machines Corp 154.98 -1.13 -0.72 2,702,153
JNJ Johnson & Johnson 118.81 -0.65 -0.54 4,772,980
MMM 3M Company 177.39 -2.46 -1.37 1,910,978
MSFT Microsoft Corporation 57.43 -0.39 -0.67 19,955,336

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