Looks like another good start for the day with a chance of breaking yesterday’s high of DJIA 13,879.
Some technical indicators indicate fatigue, and the need for some consolidation of January’s 11% surge, so reaching for stocks that have had a nice run is risky, short-term.
I see a lot of stocks with good technical price patterns. Expect a rotation of strength as those breakout and run, others correct.
Near-term support moves up to DJIA 13,776 (S&P 500: 1,490) . Apple may adversely impact the S&P 500 and Nasdaq again today. Breaking that, look for support at DJIA: 13,712 (S&P 500: 1,483).
On January 11, I technically analyzed each of the 30 DJIA stocks for a “reasonable upside” and “reasonable downside” target. I then tally the prices, divide by the Dow’s divisor and get the DJIA for each case. I got a reasonable upside of DJIA 13,900. I did the calculation again yesterday and got an upside of 14,170.
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.
DJIA: 13,825.33
S&P 500: 1,494.82
Nasdaq Comp.: 3,130.38
Russell 2000: 900.19
Friday, January 25, 2013 (9:07 a.m.)
APPLE (AAPL: $450.50) Now the Apple Bulls are dumping !
Obviously, some of the institutions were more prescient than others and were selling every chance they got all the way down from $705.
A Yesterday, “gap” open, down 44 points from Wednesday’s close, dropped the stock further to $450 before rallying 15 points in early trading. Traders who bid below the open had a chance to clip 10 points or so, but they had to be nimble, because more selling appeared to depress prices again back to the lows for the day. The stock closed down 43 for the day, a loss of 12.4% – ugh !
CNBC interviewed analysts yesterday who were bullish on AAPL before its demise. Some revised projections, even switched to “hold” or “sell.” (so much for true love !)
It’s always dangerous to get too chummy with a stock as an analyst, or investor. I was surprised how many pros were faked out here, they really didn’t see this disappointing Q4 earnings report coming. What’s worse, a number are selling here just as it is trying to find a comfort level.
The big question here is, how much of AAPL’s Q4 earnings shocker was discounted by its four-month, 36% slide ?
Unfortunately, yesterday’s flush didn’t clear the air. The fact it gave back all that it gained yesterday suggests it has to go lower, by way of yet another “flush today or a series of “chops’ down (plunge – technical bounce – plunge – bounce – plunge, etc.) until it finds a comfort level.
If at this point, I am at risk of losing you, I apologize. This is ugly, but this is the business. This is the “casino” side of it. And just as it was over-bought at $705, it will become oversold at levels not much lower than this.
Before the earnings report was released, Wednesday, I targeted $438 as a level it could reach in the event of a selling climax. That looked about as possible as the Eagles having a winning season.
At its September high of $705, AAPL was up ten-fold in four years. It doubled from mid-2011,
It has long passed the “ouch” point and is damn close to the, “I can’t stand it anymore point,” where investors just want out, before it goes to zero ! I would say that point is $398. It may not get there. This is why the “buy low – sell high” adage sounds good, but is easier said than done.
Why ?
Because human nature gets in the way – fear at bottoms, greed at tops and this one is classic.
Someone is buying, they are just getting steamrollered by panicky sellers.
Lets say you really believe in Apple and think it is cheap, but aren’t one of the nation’s 1%, and don’t like trying to catch a falling knife. Buy one-tenth of what you want to own. Watch it. If you like what you see, buy another 10th. Diversification doesn’t just apply to stocks and industry groups and investment products, it applies to “when” you buy.
The “in for a dime, in for a dollar” technique is for sound sleepers only.
Resistance starts at $458. This move will run into sellers who see every uptick as an opportunity to get out. That may be true, short-term. Another slide is likely, not because it is justified fundamentally, but investors are scared. Worse yet, a number of institutions have changed their forecasts.
I do not own, nor am I short Apple’s stock.
FACEBOOK (FB – $31.08): Bulls in control again, but a seller appeared in the last hour of trading Wednesday and again yesterday. Resistance is $31.14. Support is $30.90.
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.
FRIDAY:
New Home Sales(10:00)
Consumer Sentiment (9:55)
George Brooks
“Investor’s first read – an edge before the open”
[email protected]
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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.
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