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Sunday, September 30, 2012

Market Thought... da jobs

Jobless Claims were pretty good on Thursday. The number is currently at the low end of its range.

With such choppiness in the Jobless Claims, last month produced an Employment Situation that was below expectations. This month may produce something similar. Current expectations is that of 113,000 jobs created (or 130,000 private sector jobs). The August employment number was below expectations, yet the market held up far better than I expected. Maybe this will be a similar situation.

The market is fairly consolidated with the SP500 pulling back to the 20 SMA and the treasury yield pulling back harder with a very oversold position.

A solid jobs number will push the treasury yield higher, and fuel for the market (and justify higher multiples on stocks like GOOG, AAPL etc).

Thursday, September 27, 2012

trades... GS, IBM, JPM, QCOM

GS, JPM - My thesis on the financials has been very simple and consistent: improved US housing,  EU crisis off the table and a willingness to not have the world end, the banks should not be trading below book.

I like GS for the oversold pop, and may even push toward 130.

I want to add to JPM, but would like to see it in a greater over sold position.  (The condition will probably take place around 39. Although I currently maintain a position in JPM.)

IBM - Its consolidated, and oversold. But its still near its top-line resistance testing its all time highs. I think it will ultimately make new highs, but would rather enter around 202-203. (Although my discipline will probably force me to enter a position on the next down day because the technical position is appealing to me.)

QCOM - This stock has some catching up to do. Many key tech stocks have run up their multiples, however QCOM has yet to really do so. Despite an instrumental position amongst the very names that have run up. Adding to the bullishness, Texas Instruments has bowed out of the smartphone chip race and QCOM introduced chips to solidify a position in the low-end market.  QCOM merits a trailing PE of 20-22.

Tuesday, September 25, 2012

Apple maybe dependent on the market

Now that the iPhone 5 is out, I am waiting for a re-entry point. Below are my considerations.

Technically the stock is showing weakness. Obvious initial supports start at 655 and 645 (via the 50 SMA).

The action suggests to me that Apple wants to get very oversold, and test these levels. 

There should be a technical bounce, and if market sentiment holds up, Apple should keep pushing to the low 700s. If market sentiment shifts, AAPL will test the low 600s.  Probably near the strong pre-rally base near 615.

The technicals are supported by the pattern of the trailing multiple.

In times of a healthy rallying market, like we just witnessed, AAPL has seen a multiple between 16-17.  In a weak market AAPL's trailing multiple has see an extreme low of 12.5, but typically trades near 13-14.

Now that the macro conditions are set, I want to establish the micro conditions. Apple is projecting an EPS of $7.65, with the street at 8.84. (Not extreme.)  If the street's estimates are used, AAPL will have a trailing EPS of $44.33 which would justify the follow stock price:

trailing PE of 16 = 709
trailing PE of 14.5 = 642
trailing PE of 13 = 576

At the moment, I am not expecting a market with extreme negativity. Although I am frankly very surprised the market has held up as well as it has since the last Job Number and Jobless claims figures.  Based on the Jobs data I am seeing a market that would justify a trailing multiple around 14.5 for AAPL.

If we start seeing jobs numbers that start beating to the upside again, and Jobless Claims that continue the down trend (as of now we are in a stalling pattern), then AAPL should get its higher end multiple.

IMO, the above merits a re-entry near the low/mid 600s.

When looking out two quarters, toward the end of the year, there are better numbers. If the street's estimates are used, 15.30, AAPL will have a trailing EPS of $44.33 which would justify the follow stock price:

trailing PE of 16 = 732
trailing PE of 14.5 = 663
trailing PE of 13 = 595

If anyone is willing to ride AAPL into their next quarter, with a strong market AAPL should test its highs. In a mild market, AAPL should test the mid/high 600s.   

The way I want to play AAPL is to start entering near or below 640, and hope a mild/bullish market sentiment is maintained.

Sunday, September 23, 2012

Apple behavior

Apple's behavior seems a bit off over the past few months. A few tangible aspects of this:

1. "Double down on secrecy", said Tim Cook in May. The iPhone 5 rumors were no-where near "doubling down". Usually the rumors are all over the place with some aspects of truth. But this go around most of the rumors appeared to be blatant leaks.

2. Sacrificing user experience via maps with a very ill prepared replacement.

Make no mistake, I am an Apple fanboy, and the above are two small pieces of a much larger well oiled machine. But the above behaviors concern me a bit. Here is why:

1. I have huge respect for Tim Cook, and he is one of my favorite CEOs, but when a CEO says they are going to do something and that 'thing' does not happen, I take notice.

2. Wonderful and colorful adjectives were used to describe Apple's maps when they first introduced iOS 6. Yet the product is truly a step back. Then Apple asks for 'patience', as the service will eventually improve. In this case the adjectives were bullshit. (I'm not a fan of bullshit.)

Apple shifting to their own maps makes business sense. Location base services will be a key aspect of the post PC world, and it seems like Apple wants to be a key player in the space providing the location data. A very interesting assumption can be made when combining Passport to a refined location data set. From this lens, their decision makes sense.

Apple sacrificed user experience to better position themselves in the next stage of mobile, and they tried to do it by feeding their users bullshit. (I don't know anyone who likes being lied to, except maybe Sheryl Crow :)

These are small problems for Apple. Very small. But behavioral changes non-the-less.

Saturday, September 15, 2012

Market Thought... degree of pullback

IMO, with the established stability of Europe, the Fed's policy creating some certainty (for valuations to be established) and US housing firmly rebounding, the question no longer becomes if the market will rally.

The question becomes how severe will the pull backs be?

The markets are fairly overbought, the VIX/SP500 overlay is at a low again and the 10yr yield is at a resistance level.

The scenario favors a consolidation/pull back.

My internal debate of the pull back is between the 14SMA or the 38SMA. I suspect the 14SMA, but the one thing that can take us to the 38SMA is if the "fiscal-cliff" debate gets to "douche-bag-level" if the Republicans want to spike President Obama.

As of now, the chatter has been very market friendly as Democrats and Republicans are seemingly working together. The reason I worry about this (at least somewhat) is because Romney had the douchebaggery to claim $200,000 to $250,000 income is considered middle class! I don't know what Romney is smoking, I wish I did, but a politician to be so out of touch is simply dangerous. And we got plenty of those out of touch schmucks in congress and the senate.

(For those living in NYC (or other major city in the US) that think 200-250K not enough to live very very comfortably, move or change your lifestyle. I lived in NYC while making a little north of 100k including salary and trading, and I lived comfortably.)

Tuesday, September 11, 2012

Zuckerberg interview... watch it

Anyone interested in Facebook, or owns the stock, needs to watch his "fireside chat" with Arlington

My take aways:

1. Facebook is more than serious about mobile, and they (or Zuckerberg) get it.

2. Products focused on monetization will be released over the next 6-9months.

3. They are working on the equivalent of Google+. (I specifically say Google+ because social will never encompass all of search. So anyone poo-pooing Google over this is making a mistake.) 

From the chart-side of things, the stock was firming up intra-day. After hours action confirms the bottoming.

Ultimately I am looking for FB to head towards 23-24. But I now be actively looking to increase my position on points of consolidation.


The 'new-phone' run up appears to be abating.

The obvious support is the 50SMA.

If the market holds current sentiment, AAPL's multiple should stay above 14.5, which corresponds to the 50SMA level. (When factoring next quarter's estimates.)

If sentiment sours, I would expect AAPL to achieve its 20SMA via the weekly, and the multiple to approach 13-13.5.

I am looking to re-enter a heavy AAPL position near 600, but will re-enter in stages.

Sunday, September 9, 2012

Market Thought... stronger dynamic

In the mist of a fairly shitty headline job report, the market acted far better than I thought it would.

The strength was facilitated by the industrial and commodity related names. The jump was due to the market realization of China's subtle stimulus. Chatter got louder on around $150B worth. IMO, this provided the support to the market.

Market strength was also supported by the firmness of the 10yr treasury.

After an early AM decline, at 9:30am the trend reversed. (IMO, putting a floor on the market.)

This trading dynamic is far different from what we saw in April. A poor jobs number was the catalyst to the harsh market correction.

I am really not sure why the 10yr acted better this go around. But a closer look at the job numbers suggest china's stimulus may facilitate the jobs picture.

Private jobs saw an increase of 103K, with the high reductions within Goods-Producing.

 A stimulating China should require more goods, which should be good.

Gotta respect the market action, but I will still be paying close attention to the Employment figures and Jobless claims.

Thursday, September 6, 2012

trades... AET, IBM, QCOM, SP500

AET - A health care stock discounting over 30% earnings reductions, recently saw its technicals firm up. Its pulled back from its attempt to break out. Looks interesting for a move towards 42.

If it can not hold the SMA support, it will probably test 37.

IBM - After testing its resistance, IBM has pulled pack. After this test, that negative trend should be breached during the next test.

QCOM - Sitting on daily and weekly support.

SP500 - The market has eased from its overbought condition, and technically is interesting here. However, the Employment Number is on Friday. This number has led, and will continue to lead the market. (Allowing for higher or lower multiples.)

Although I am expecting a decent (in-line) number. Prudence dictates to add protection tomorrow, going into the Friday number.

Saturday, September 1, 2012

iPhone rumors suck

I think they are shitty. Really really shitty.  The truly annoying aspect of these rumors is the willingness of popular tech blogs to echo the garbage.

The rumors ignore the hardware trends, along with Apple's design trends.

While the iPhone history is a short one, we should be expecting a complete redesign. The 3G and 3GS were similar, and the 4 was a redesign. The 4S was similar to the 4, hence I am now expecting a redesign. Not a larger version of the same phone. As seen here:

The rumor spread by Appleinsider, and the formally great Techcrunch.

If the new iPhone has the above unoriginal design, the stock's reaction will be pretty nasty.  But this design ignores industry trends.

The recent crop of really good LTE phones have a sleek thin form factor.

HTC One:

Galaxy 3:

Apple has always been a leader in design, so I am not expecting them to mimic any of the above designs. But to say they are not going to freshen the design considering the above capabilities is simply wrong.

A bit of iPhone design chatter that existed about a year ago suggest a sleeker thinner form, yet unique. It was the tear-drop design.

I am not choosing which rumor to pay attention to. I think they all suck, and frankly I ignore them. I only listen to data.  The data is suggesting a completely new form factor. And the above indicates a unique sleek LTE form is very doable. Hence, Apple will do it because they always push the design limits.

(If they don't push the limit of design and hardware, it will be the first negative sign the company is changing.)