-Executive Summary-

• Markets Advance Further…   See below…
• Apple’s Big Surprise … See below…
• Citibank misses on earnings. At the Stock Market Companion, we would call Citi’s earnings … not so bad – The stock is at $5/share and not $50/share.

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– Markets “At a Glance” –

(Please scroll down to the end of the report to see your favorite benchmarks – Dollar, Oil, Gold … closing prices and daily direction.)

– Market Trends –

*Summary of terms from Trader Vic II-Principles of Professional Speculation (pg. 140-141)
*_________* Represents a change in trend rating.

– Market Perspectives –

For your added perspective, we’ve included these two different views of the broader market –

1. SMC SP-500 ETF Daily Chart (Click to open helpful chart in a separate browser window).

2. SMC SP-500 Weekly Chart (Spanning back through 2007)

– Today’s Highlights –

There are 3 major influencers today in the market –

1. CONCERN over European sovereign debt problems diminished a bit as Spain was able to sell bonds at a reasonable price. This strengthened the euro against the U.S. dollar and gave the European markets a bit of a lift.

We have read reports that Germany is experiencing its best economic conditions reported since the re-unification.  This is significant and demonstrates a good underlying economic environment that is heavily clouded by legitimate concerns about debt levels in countries on Europe’s periphery – Spain, Portugal, Greece, Ireland…

Spain’s ability to sell bonds and Russia’s statements today about their willingness to purchase Europe’s bonds issued to cover recent bail-outs (on the heels of China and Japan announcing the same over the last week or so) is favorable, but has NOT improved the Bank of Ireland’s (Ticker: IRE) share price.  We are watchful here.

2. Steve Job’s unexpected medical leave of absence announced yesterday while the markets were closed and ahead of today’s quarterly earnings report to be released by Apple after the close.  See more below.

3. Citigroup (Ticker: C) reported earnings that were a disappointment.  This disappointment put a bit of pressure on other financials like Bank of America and J.P. Morgan Chase.

– Story-Stock Investing –

Yesterday, while the markets were closed in honor of the late Dr. Martin Luther King, Apple Inc. (Ticker: AAPL) reported that their CEO Steve Jobs would be immediately taking a medical leave of absence.  This is a big surprise for investors and fortunately they had time to think about the announcement and what the facts are, before simply hitting the “sell” button.  Apple was very clever to coordinate this announcement with the markets closed AND with their earnings report from a likely strong quarter immediately on the horizon.  As an Apple Inc. investor, at the SMC we issued this SMC Intra-Day Update today concerning this development…

Dear Subscriber-Friends –

Yesterday we heard the news about Steve Jobs taking immediate medical leave.  Here’s Steve’s note to Apple employees –

Team,
At my request, the board of directors has granted me a medical leave of absence so I can focus on my health. I will continue as CEO and be involved in major strategic decisions for the company.  I have asked Tim Cook to be responsible for all of Apple’s day to day operations. I have great confidence that Tim and the rest of the executive management team will do a terrific job executing the exciting plans we have in place for 2011.
I love Apple so much and hope to be back as soon as I can. In the meantime, my family and I would deeply appreciate respect for our privacy.
Steve

First, we wish Steve Jobs well and pray that he will be healed of his cancer.

Here are our thoughts about Apple Inc. from our standpoint as an investor –

1. Apple’s decision to coordinate the release of the news about Steve’s medical leave during a holiday, while the markets were closed and the day before reporting in all likelihood very strong earnings – was very smart.  On any other market day, the stock would have been terribly shaken.  This way, investors had time to think before simply hitting the “sell” button.

2. Many investors sold shares this morning on the news, but the stock has recovered well.  Apple reports quarterly earnings today after the close and the numbers are probably going to be very good.  Let’s say that the earnings come in at $5.50/share for the last quarter.  Annualized this means earnings of perhaps $22/share going forward.  Apple at this moment is selling for $339/share.  $339/22 = 15.4.  Therefore, Apple’s current price earnings ratio is possibly approximately 15.  This is a slight discount to the market average P/E of around 17, and certainly a major discount when we take into consideration that Apple grew last year at a rate of +66%!

3. Any time that a major US publicly traded company “losses” its CEO, by and large you can expect an approximate -10% hit on the stock.  However in Apple’s case, Steve is still somewhat involved in the management of the company AND this is not the first time that he is taking a leave of absence.  So Apple is not “losing its CEO” AND the management team in place has demonstrated excellence in handling the company during Steve’s previous absences.  OK.  This morning the stock could have been down -10% or more in value, but fortunately it wasn’t.  It wasn’t clear how far Apple would sell-off (Steve Jobs has rock star status and is loved by many), but – as we wrote above – thankfully it has recovered well.

4. As a general rule of thumb, we don’t like to hold our stocks going into earnings.  In this case however – with the stock recovering well –  we are probably going to hold our stock beyond the close today and see what earnings bring.  This is our own choice.  Each investor must decide something like this for themselves.  We will keep our stop in down around $320/share.

5. Many financial firms who rate stocks in order to bring attention to themselves and also to the stocks that they are talking about, have initiated buy ratings on Apple stock.   During the month of December we saw “buy rating” one after another come forth on Apple and yet the stock didn’t move higher.  Red-flags were inching up in our minds about Apple.  Beware of a stock that has had a strong run, is sitting at highs, receives strong buy ratings, and doesn’t move higher with a favorable market!  BUT in this case, Apple held on and pushed higher finally on the first trading day of the year.  On that day, we got on on board with Apple and announced our move to all of you.  Since then, several more financial co’s have announced their favor of Apple Inc. and given targets in the $400 range.   Apple has moved nicely higher.  Today after the close we will see how Apple is doing with their earnings.

6. While we believe that competition is heating up  for Apple Inc. in the iPad space and in phones, we believe at this time that their earnings are going to be strong.  Their forecast for the rest of the year however will likely reflect increasing competition and may cause the stock to bounce around a bit.  If it appears that competition is getting a strong foot in the door, then the Apple stock may well sell off on expectations of reduced earnings going forward.

Your – Stock Market Companion

Please remember – at the Stock Market Companion we do not and cannot give individual investment advice. According to the State of Washington RCW 21.20.005 the Stock Market Companion is not a Registered Financial Advisor and we do not render any advice on the basis of the specific investment situation of a particular individual. This information is for a wide readership and is not intended for any particular individual,  and under no circumstances should our Market Update or Watchlist be considered an investment recommendation or plan for any specific individual.  By accessing this material, you agree that the Stock Market Companion will not be held liable for any actions taken by a subscriber or other parties.  Please seek the counsel of a broker or other licensed investment professional for accurate pricing and concerning the suitability of all investments that you may be considering. Disclosure : You understand that the Stock Market Companion holds positions in the above mentioned securities.  Based on market related or personal events these positions may change without notice.

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Please remember – at the Stock Market Companion we do not and cannot give individual investment advice. According to the State of Washington RCW 21.20.005 the Stock Market Companion is not a Registered Financial Advisor and we do not render any advice on the basis of the specific investment situation of a particular individual. This information is for a wide readership and is not intended for any particular individual,  and under no circumstances should our SMC Intraday Update, SMC 15MinuteStocks Market Update or Watchlist be considered an investment recommendation or plan for any specific individual.  By accessing this material, you agree that the Stock Market Companion will not be held liable for any actions taken by a subscriber or other parties.  Please seek the counsel of a broker or other licensed investment professional for accurate pricing and concerning the suitability of all investments that you may be considering. Disclosure : Please understand that the Stock Market Companion may hold positions in the above mentioned securities.  Based on market related or personal events these positions may change without notice.

– Stock Market Companion – Current Holdings –

– Stock Market Companion – Performance –

Please click on this chart to see the Stock Market Companion 15MinuteStocks stock performance versus the SP-500.  It will open in a separate browser window.
* Gains (losses) do not include brokerage fees.   Our returns are very strong … BUT …  WE have to remind everyone just like all other financial sites in America – Past Performance is No Guarantee of Future Returns.  Unlike others however, our objective is to teach you to be able to make these types of strong returns On Your Own.

All of the investments – stocks, entries, and exits are listed on our Stock Market Companion Watchlist at the bottom of the spreadsheet, in the section labelled Former Holdings.

– Benchmarks “At a Glance” –

Data Source : Financial Visualizations Inc.

Signing-Off for Today,

Your -Stock Market Companion

** Stock Market Companion Disclaimer **

The Stock Market Companion (SMC) Market Update and Watchlist are published documents to subscribers that show how we (SMC) are viewing the markets and what we are watching, investing in or selling today.  This information is for a wide readership and is not intended for any particular individual,  and under no circumstances should this Market Update or Watchlist be considered an investment recommendation or plan for any specific individual.  By accessing this material, you agree that the Stock Market Companion will not be held liable for any actions taken by a subscriber or other parties.  You understand that the Stock Market Companion holds positions in the above mentioned securities.  Based on market related or personal events these positions may change without notice.

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