Wednesday, January 29, 2014

Pre Fed Bounce

In my last post I showed how the S&P 500 was trying to bounce off support.





The market ended up with a decent plus day and the wise guys bought lots of futures right after the close in order to try to get some follow through with a gap up in the morning. Note how the market closed strong, but ended up no higher than the opening hour's high.
 
$SPX Day Tic Chart
 
 


Right now the $SPX futures are up 8.75 points in Globex trading. This after no special earnings reports from YHOO and T after the close. In YHOO's case it was Alibaba that unexpectedly disappointed. As for T there was nothing special. Yet the futures jumped anyway - circled on chart below. This looked like a rigged harness race at Monticello Raceway in New York. The one where the driver in the lead with 100 feet to the finish line, stands up and pulls back on the reins hard enough to choke the horse which then comes in last, while the last place horse comes out of nowhere to win the race. Everyone is in on the comical scam.

Needless to say, I am very skeptical of this bounce, given all that has happened so far this year. Also, as most people expected, The State Of The Union Address was non eventful.

$SPX 24 hour Tic Chart



It may sound counter intuitive, but many times before the results of the Fed meeting are announced, the market will rally. That is because it takes a relatively small amount of money for institutions or hedge funds to run the futures up and then sell stocks at higher prices into the news. All games, but effective. Most traders try to get flat before the news release thus creating a trading vacuum. vacuum.  That leaves it to the wolves to have some fun. And if the Fed news is good, they have gotten a head start on things. Let's see if the overnight futures hold and if the sharpies can pull this off again.

Despite the recent sell off, most sentiment indicators are nowhere. Thus, the $VIX, which I have show in the last few posts fell right back down.

$VIX




The only leading stock that made a new high was NFLX. Also the leading drug stocks looked good as BIIB, MRK and GILD all had good days and were all above their breakout points.

BIIB

 
MRK
 
 
 
 
GILD
 
 
 
 
 
 
NFLX
 
 
 
 
Lastly there was the AAPL short that I put on right after the earnings release Monday night. There is much controversy about AAPL these days. It all boils down to two factions.
 
1 -  The Carl Icahn argument citing huge earnings, an amazing stockpile of cash and a low PE multiple, a dividend, and so on. They want a larger stock buy back and so on
 
2 - Then there are the Moore's Law People. The cite increasing competition, slowing growth, huge size, a need for new innovative products, decreasing profit margins, disappointing unit sales, etc.
 
I believe that AAPL will not be a train wreck, but right now it has broken down on the charts and could possibly pull back to the first area of support at it's 200 day moving average.
 
Earnings and guidance were poor and the company appears to be floundering. In my opinion AAPL needs to spend its cash on changing it's business. Somehow they must keep the repetitive sales items from I-tunes and work their way out of the hardware business. At the same time they must start to spend money like GOOG does on innovation and buy complimentary businesses. In order to do this they need a leader with a vision. I do not believe that Tim Cook has that vision. He knows the AAPL business cold, but he cannot conceptually get to the next step. It's either that or bringing back Jack Welch to transform AAPL into a conglomerate like he did for GE years ago. If AAPL does not take the offense soon, it will become another huge growth company that slowly drifts like IBM and HPQ did while everyone talks about it.
 
AAPL
 
 
 


BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.
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