– The Stock Market Companion –

15Minute Market Update

October 17, 2011

—— Stock Market Investing since the 1980’s ——

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-Executive Summary-

  • Knocked-back!  The markets pulled back sharply today from the lateral range top that we talked about in Friday’s 15Minute Market Update.
  • See below for a list of important catalysts behind today’s move in the market.
  • The Federal Reserve Bank of New York’s Empire State Manufacturing Survey was released today for October.  News = not so good.  See below.
  • Apple (AAPL  $419.99)  crossed into new high territory this morning, BUT THEN received a DOWNGRADE on its shares today.  This is the first for Apple that we have seen in a long time.  See below.
  • Apple reports earnings TOMORROW after the close.  See below for details.
  • IBM reported good earnings after the close this evening, but the stock is DOWN -$9 after the close.
  • Netflix (NFLX $117.33) held firmly in the face of today’s aggressive sell-off in the markets.  See below.
  • Alcoa, Inc. (AA $9.58) responded poorly to today’s advance in the U.S. dollar and negative news from the Empire State Manufacturing Survey.
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– Stock Market Companion – Current Holdings –

Nr. Co. Ticker Action Entry Date Current Gain (Loss)
1 Freeport McMoran FCX Holding 10/4/2011 +11%
2 Ford Motor Co. F Holding 10/5/2011 +12%
3 Apple, Inc. AAPL Holding 10/11/2011 +6%

FCX, F, and AAPL do not offer low risk entry at this time.

If the above “Current Holdings” table is empty it means that we are not holding ANY stocks at this time and that we are therefore 100% in cash.

– 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 Price (Today’s Close) Unit of Measure Today’s Direction
SP-500 1,200.86 Index DOWN= -23.72 points
DOW-30 11,397.00 Index DOWN = -247.49 points
NASDAQ 2,614.92 Index DOWN = -52.93 points

– Market Trends –

Trend

SP-500

DJ-30

NASDAQ
Short Term UP UP UP
Intermediate Down Down Down
Long Term Lateral Lateral Lateral

*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 this chart of the broader market (Successful stock investors develop and start with a minds-eye view of the broader market and keep it clear) –

SMC SP-500 ETF Daily Chart

Please click on the chart to view it in a larger size.



– Today’s Highlights –

The markets struggled all day with sellers taking their profits from this recent 2 week rally off October 4th lows.

The catalysts for the today’s profit taking are clear –

  • The advances off recent lows have led to the most gains in such a short period of time since 2009 – some investors do not want to give up these gains.
  • Alcoa (AA $9.58) kicked off “earnings season” last Tuesday night, and investors are careful about holding stocks going into earnings – particularly with such strong profits on the “plus” side.
  • Germany’s Finance Minister Schaeuble said today that the deadline identified a week or so ago by German Chancellor Merkel and French President Sarkozy for a European solution to the debt crisis there may not be met.  Hope was in the air for a resolution by the European EU summit date set for 10/23.  Here’s a status report from the Wall Street Journal.
  • The Federal Reserve Bank of New York released its Empire State Manufacturing Survey this morning.  The data doesn’t look too rosy.  Click here for the details (direct from the New York Fed). It’s a report that is easy to read and content that we will use for some upcoming quiz material.  As investors, we watch such Federal Reserve Bank surveys carefully to get a pulse on how the economy is behaving.  In America, we have the benefits of good data on our economy coming from a variety of sources.

– Story-Stock Investing –

 

To many investor’s surprise, Apple, Inc. (AAPL $419.99) received a broker DOWNGRADE today.  Mr. Colin Gillis from BGC Partners was on CNBC today explaining his rationale behind his downgrade of the shares.  He said that he doesn’t see a problem with Apple, Inc’s business model, he simply is concerned about –

  • Apple perhaps needing to continually beat previous record earnings to have upward advancement in the share price.
  • Lower margins at Apple due to September quarter back to school sale prices

Mr. Gillis also said that he thought investors may have a chance to purchase Apple, Inc. shares below $400/share soon. Click here for a link summarizing his comments.

On the other side of the argument, Apple announced today that sales for the iPhone 4S on the first weekend of sales more than DOUBLED from last years launch of the iPhone 4.  Apple announced that  number of phones sold over this first weekend reached 4 million units!  Wow.

Here are some things to keep in mind as investors –

  • Apple reports quarterly earnings tomorrow after the close.  They generally come out with their numbers right about at 4:30 pm, for those interested – with a conference call following at around 17:00 EST.  IBM came out with earnings this afternoon after the close that were pretty good, but the shares are DOWN -$9 after the close.  We may get a sell the news reaction to Apple’s earnings tomorrow.  We simply don’t know.  For those who are satisfied with these current gains on their investment in Apple, they should take their profits, knowing that the stock may either gap HIGHER tomorrow following earnings or LOWER.
  • Apple is doing a lot of things correctly.   Shares have moved very strongly over the last weeks.  There are plenty of other brokers with price targets on Apple, Inc. shares above $500/share.
  • We don’t like how Apple, Inc. shares sold off today.  Volume was high on today’s sell-off.  We don’t like tonight’s action in IBM shares in response to good earnings.
  • The problem in Europe related to sovereign-debt is causing investors to take their profits and reduce exposure to risks.

Shares in Netflix (NFLX $117.33) held firm today in the face of a strong sell-off across the markets.  A move above $120 may get a short squeeze going that nimble investors can take advantage of.

Shares of Alcoa, Inc. (AA $9.58) jack-knifed down hard today on a strong U.S. dollar and the negative news from the Empire State Manufacturing Survey mentioned above.  This stock is a multi-year lows, so we don’t like seeing this type of behavior.  Ideally, the stock would pull-back and simply quiet down after last weeks high volume participation in the shares AND better than expected earnings.  No such thing today.

Boeing (BA $61.78) has launched its 787 Dreamliner and delivered its first production model to Japan last month.  Today Boeing received one of the biggest CANCELLATIONS for the new aircraft from China Eastern Airlines Corp.  They cancelled their order for 24 jets in exchange for an order of 45 of Boeing’s smaller 737.   That’s not good.  Here’s an article. If Boeing’s chart was much higher, after multiple steps higher – this type of news would be a reason to possibly short the stock or buy put options.  This is however not the case for Boeing.  It’s chart looks identical to the S&P 500.

 

– Benchmarks “At a Glance” –

US Dollar

1.3730 USD = 1 Euro

USD / EUR

Dollar = UP

Gold

$1,676.60

Ounce

Gold = Flat / Down

Oil

$86.39

Barrel (West Texas Crude)

Oil = Down

30 Yr. Fixed Mortgage

4.33%

Percent

Down

10 Yr. Bond Yield

2.16

Percent

Down

1 Yr. CD

1.16

Percent

Flat

-FireData Source : Financial Visualizations Inc.

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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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  • The markets were AGAIN divergent today, just as yesterday revealing further weakness in the technology sector while the broader market (S&P 500) and the DOW (DJ-30) held POSITIVE.
  • Research in Motion (Ticker: RIMM $27.75) reported earnings last night that were a major disappointment.  We go through the details below.  The company received 2 broker upgrades going into earnings.  The stock then lost -21.45% from yesterday’s close into today.  We go through our steps in handling our brief investment in the stock this last week – AND WHY, below.
  • Crude oil continued to descend today, reflecting a drop in value of the U.S. dollar – BUT also  concern of future demand as the global economy slows down.
  • The S&P 500 is finding support at its 200 day exponential moving average.  If the broader market doesn’t find strength here and begins to sink further, the next near point of support is the low it plumbed during the recent nuclear crisis in Japan.  If it fails that point, then the intermediate term trend will be DOWN.
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