VIX is up while the market is up… Strong Sell signal. And I am seeing the resistance, and downward pressure.
Ease up on some holding or protect. (Don’t forget how bad of an economic environment we are in.)
I already added to my SPY puts significantly.
Closed out the Apple calls with this move.
As stated earlier, I started a short position on the market. I am using 128 Sept Puts. I called for the market correction upward, with Oil playing the biggest catalyst. Now things are getting a bit tired, although end of day action today was impressive.
The SP500 is overbought, still in a very negative trend and approaching SMA resistance:
The VIX is oversold, sitting on support and looks to want to move upward… which means the market will mostlikely move downward.
Then we have the major catalysts to this market… the downward move in Oil ( 
) and the rally in the financials.
Oil looks oversold, around some solid support levels via the horizontal support and 90SMA. Areas to which I view to be a bouce area.
Financials are at a SMA resistance point and overbought.
The two major catalysts seem to need to consolidate, along with the overall market, so I am playing this consolidation via the SPY puts.
Analysts are focused on margins. As if AAPL needs to maintain a high gross margin to crush estimates. Uhm, they proved they can crush estimates with lower expected margins last night. Expect more of this. Management pretty much spelled it out for investors. They are taking the Wal-Mart approach now (well, with a much more quality), and if I were a PC maker I would be worried.
We are living in a Web based world, and Mac computers are compatible with all major PC applications. Its niche computer status is going away quickly, like it or not. But for this to happen, margins obviously have to come down, its simply a consiquence of the equation, not fundamental deterioration.
I just do not understand how analysts are not seeing this. Maybe they are, as they kepted their target prices fairly high, but not blatantly supporting the strategy.
I included AAPL in my core holdings.
1. I lightly added to my AAPL calls via 135 Oct Calls. Maybe I am missing something, but I have not heard a good reason for the level of decline…
-Reduced margins… but market share gains took care of that on the earnings front.
-Poor guidance… can give a rats ass about AAPL’s guidance, given their history.
-Job’s Health… that is just a low blow by the hedgies that were short. (Where is the SEC regarding this rumor, and which hedgies pushed the story in the NY Post.)
-iPod sales sucked… well iPhone picks up the slack.
I can go on and on… but this is the psychology of the street at the moment, shoot first and think reasonably later.
2. I also took on a market short position via 128 Sept SPY puts. (I’ll post charts later in the day regarding this.)
Wow… Moody’s really needs to get investigated, seriously. Threatening a downgrade on the only other triple A rated insurers. (With the exception of Berkshire’s ofcourse.)
This leaves a serious gap in the bond insurance biz. Something does not smell right with this move. Especially given this article, where Moody’s states there is more than enough capital.
AAPL produced good numbers today. EPS was 1.19 vs 1.08 Analyst estimates. Since Wall Street only care about estimates lets put things in perspective.
For the year Apple is estimated to do 5.21. Apple beat estimates by 11cents this quarter, and guided for 1.00 vs the est. 1.24. Using the 1.00, Apple will have est. 2007 eps of 5.08.
At 150, AAPL’s PEG (assuming 25% growth, and 5.08 2007 eps) is now 1.18. Is that too expensive? Or does AAPL’s fundamentals mean nothing, and all the street cares about is Job’s health?
I really do hope Mr. Jobs is well, for his family’s sake, not for the sake of the stock. But putting things in perspective… if something should happen to him tomorrow, will the iPhone simply go away? Will Mac’s momentum do a u-turn? Will all the people exposed to Mr. Job’s culture and way of thinking forget how to improve on awesome products? Is Apple a one person company?
A lot of stupidity is being discounted into AAPL right now.
Bought back a core position in PWR in the low 32s, as I stated I would around this price.
Your only good as your last trade, and I do not want my current AAPL trade to be a bad one, so I just kept thinking about how to properly play it over the weekend.
The Factors:
1. The market. No positive overall market for any stock can be assumed.
2. The economy and fundamentals. The consumer oriented economy is sucking but Apple has proven to go against the grain. 1M iPhones in a weekend, Mac sales grew nicely and (for future Mac growth) hiked motherboard orders by 20%.
3. The Chart. Oversold, but with earnings coming out Monday afternoon anything can happen.
4. Earnings. Here is a negative argument. (Hell, the write up was even referenced in a CNNMoney article.) I do not agree with the negative prespective, but I can not deny the fact that Apple always guides uber conservatively. With the general sense of fear in the overall market and ho-hum earnings from GOOG and MSFT, traders will probably sell off first and ask questions later.
If there is a negative reaction to earnings, a move to 155 could be seen. Right now I am long oct AAPL calls, and will stay long into earnings (unless Monday sees a move to around 175, which I now doubt) because of the great short-mid term fundamentals regarding AAPL. After mondays report I will be expecting a decline (but obviously not betting on one), and prepare for it. If a move to 160 is seen, after earnings, I will add to the calls. Then go heavy at 155.
Apple’s economics do not translate to the general economic environment, and with the near-mid term iPhone and Mac sales, Apple stock should ultimately benefit.
The things we do best are the things we haven’t been taught.
-Marquis de Vauvenargues
(Courtesy of iGoogle’s Quote of the day )
