AAPL Intraday Updates (Archive)

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    Posted: 21 January 2009 12:58 PM #31

    One glaring omission from the analysis is full consideration of the financials. This may be due to the group’s focus on R2000 (small cap) companies. That said, the banks got us into this mess and the banks need to get us out. Only the banks may not be able to do it on their own. As the NYT reported this morning:

    If policy makers were even remotely honest, analysts said, they would force banks to take huge write-downs and insist on a high price in return for taking bailout money. For practical purposes, that could mean nationalization or partial nationalization for many banks.

    One main difference between the options under consideration is how transparent the government would be about the ultimate costs to taxpayers and whether banks would be required to reveal the true magnitude of their likely losses.

    The ultimate taxpayer cost could be very high. A new analysis from the Congressional Budget Office suggests that the taxpayer costs are highest when the government?s asset purchases involve opaque transactions that are difficult to understand.

    Further, the analysts’ view that consumer discretionary spending will return requires at least two things to change: (i) job security, and (ii) stabilization in housing values. I’ve posted before that I think these are intertwined and that the not-so-virtuous cycle that must be broken includes Employment-Housing-Consumer Sentiment. We currently are in a negative feedback loop with these three variables.

         
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    Posted: 21 January 2009 12:58 PM #32

    Indeed, I don’t expect any sort of long-term recovery soon, for either the market or AAPL, just a short-term pop on an oversold company after they report (I hope) one of the few relatively positive holiday quarters in this economy.  But given Apple’s history of crappy guidance, I don’t have great confidence in us seeing that pop.

    Chartguy, my big question about that report is: what’s the time frame?  For 2009 as a whole?  I think most of us expect AAPL to recover some day, but we also expect things to get worse before they get better.

    Edited: yes, the banks undergird everything else.  After all, they’re… the banks.

    Which returns us to my morning’s post: is there any economically feasible, politically acceptable way to save the banks?  I just don’t see mass nationalisation working without creating more chaos and panic.  I think the only option is our buying all the crappy assets at prices high enough to keep the banks above water.

    [ Edited: 21 January 2009 01:05 PM by Winterpool ]

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    Posted: 21 January 2009 12:59 PM #33

    Winterpool - 21 January 2009 04:58 PM

    Indeed, I don’t expect any sort of long-term recovery soon, for either the market or AAPL, just a short-term pop on an oversold company after they report (I hope) one of the few relatively positive holiday quarters in this economy.  But given Apple’s history of crappy guidance, I don’t have great confidence in us seeing that pop.

    Chartguy, my big question about that report is: what’s the time frame?  For 2009 as a whole?  I think most of us expect AAPL to recover some day, but we also expect things to get worse before they get better.

    The analysts were focused on 2009. Keep in mind that the markets typically lead the economy by 6 months or so.

         
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    Posted: 21 January 2009 01:01 PM #34

    chartguy,

    Is AAPL a small cap?  You’re reading a small cap research report right?

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    Posted: 21 January 2009 01:01 PM #35

    erntheburn - 21 January 2009 02:44 PM

    In my opinion any strength here will present an opportunity for a short going into earnings, and for the coming days. The tell will be the S&P. If the index fails to break through 818-820, and gets repelled soundly, then the short is a go. If we close just above 818-820, then cash is best until things settle out. If we make a strong impulsive move above 818-820, perhaps to 830, then a small AAPL long with tight stops around the 79 area would make some sense.

    -ernie

    edited 818 to 818-820

    Just that AAPL is often used as a vehical to control the level of the S&P - that’s why I’m always yapping about it.  :wink: “They” may want to keep a leash on the S&P until aapl releases earnings and has their always magical CC. So personally, I wouldn’t take closing at or below the 818-820 as a negative or a failure. Closing below 800, now there’s a problem…

         
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    Posted: 21 January 2009 01:02 PM #36

    chartguy - 21 January 2009 04:41 PM
    chartguy - 21 January 2009 03:58 PM

    I’ve spent some time this morning digesting a small cap research report. The group focuses almost exclusively on R2000, and uses other indexes and data points to anticipate future direction. The report tends to use TA almost exclusively in making its forecasts. Accompanying this report were survey results from other small cap managers. Here are some selected highlights:

    1. Top sector preferences for 2009: (i) Technology, (ii) Energy, (iii) Consumer Discretionary.
    2. Dollar strength can?t last in normal times (e.g., post-recession). Accordingly, the dollar carry trade will unwind with a consequent flight to safety. The dollar’s rise yesterday (Jan 20) when accompanied with higher gold prices is bearish for equities and indicates a flight to quality.
    3. Expect rising 10-year yields. Data suggests yields have seen a 10-year bottom.
    4. 40% of respondents don’t think 4Q08/1Q09 earnings results will matter as they are already priced in.
    5. Events NOT priced in: automaker bankruptcy, state/local gov’t bankruptcy.
    6. Just over half (52%) of respondents are more bullish than they were 3 months ago.

    There you have it. Many of the above points contradict some of my thinking and I will be re-evaluating based on this information. At this point I’m not fully buying in, but I’m willing to consider the information. GL.

    Eric and I are on a conference call with these guys… Eric pointed out that I wasn’t too clear about the above data points. I intended to show a bullish environment for AAPL if the above—particularly #1—are true.

    Basically they are looking for a rally to follow the sector cyclical nature I explained in one my my rare, thoughtful posts last year. They believe the rally will begin this summer, 3 months before I do. They believe a big 3 BK wouldn’t impact the market, and I think it will kill the market. We both think unemployment peaks at 9% with an auto BK leading to 12% unemployment. The uber bearish are pushing me back saying that I’m fully one year too early and that we will not begin to rally until Q4, 2010.

    More and more people are tracking with the idea that no matter when we rally financials will rally first, then shipping and tech following by consumer durables and then manufacturing.

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    Posted: 21 January 2009 01:11 PM #37

    Financials will rally first?  I wonder which of them will be left standing by the time the recovery begins.  The First Amalgamated Taxpayer Bank, USA?

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    Posted: 21 January 2009 01:11 PM #38

    chartguy - 21 January 2009 04:58 PM

    One glaring omission from the analysis is full consideration of the financials. This may be due to the group’s focus on R2000 (small cap) companies. That said, the banks got us into this mess and the banks need to get us out. Only the banks may not be able to do it on their own. As the NYT reported this morning:

    Without the banks, most don’t expect them to recover in 2009, this recovery won’t begin until at least the beginning of 2010.

    -ernie

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    Posted: 21 January 2009 01:14 PM #39

    kiwitrader - 21 January 2009 05:01 PM
    erntheburn - 21 January 2009 02:44 PM

    In my opinion any strength here will present an opportunity for a short going into earnings, and for the coming days. The tell will be the S&P. If the index fails to break through 818-820, and gets repelled soundly, then the short is a go. If we close just above 818-820, then cash is best until things settle out. If we make a strong impulsive move above 818-820, perhaps to 830, then a small AAPL long with tight stops around the 79 area would make some sense.

    -ernie

    edited 818 to 818-820

    Just that AAPL is often used as a vehical to control the level of the S&P - that’s why I’m always yapping about it.  :wink: “They” may want to keep a leash on the S&P until aapl releases earnings and has their always magical CC. So personally, I wouldn’t take closing at or below the 818-820 as a negative or a failure. Closing below 800, now there’s a problem…

    Yes, I agree that a close below 800 today would be a significant problem for the bulls. But today they had a perfect opportunity to retake 818-820 with oversold conditions on the stokes and positive divergences on the RSI and MACD (daily charts). Even with that wind at their back, they come up flat. I think that’s significant as well.

    -ernie

    EDIT: PS: And I further agree that AAPL has significant influence on the S&P, but banks have even more influence, and though they’re having a positive day, it’s still minuscule compared to their losses over the past week. Just yesterday most lost 15-30 percent, and today only regaining 5-6%

    [ Edited: 21 January 2009 01:20 PM by erntheburn ]

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    Posted: 21 January 2009 01:17 PM #40

    Mace - 21 January 2009 05:01 PM

    chartguy,

    Is AAPL a small cap?  You’re reading a small cap research report right?

    No, AAPL is not a small-cap. But again, I am looking for data points on the macro environment (as suggested by my post re: MSFT yesterday). Sorry to be confusing here. My investing/trading is based first on a general thesis and then supported, or not, by TA. At this point I am trying to develop a general thesis for 2009. I can make a reasonably strong case for a retest of the S&P lows and I can make a reasonably strong case for a muted rally.

    I am grappling with the idea that we are in a period similar to 1973/74, as Eric has suggested previously, or something worse. The difference is that this time we have huge policy intervention and stimulus efforts. We have quantitative easing at a level that wouldn’t have been considered even 6 months ago. We have low yields, a strong USD and weak commodity prices. We have ongoing deleveraging at every level which has so far impacted housing most severely but likely will take a bigger bite out of commercial real estate, credit cards, auto loans and student loans. Alt-A resets are set to peak in 2010 and the repercussions could be greater than for sub-prime. And we still don’t know what junk is still hidden on the banks’ balance sheets.

    Said differently, we are in a period of deflation. This encourages people to pay down debt and delay purchases. (Inflation does the opposite.) So the question I am trying to answer is simple: when does the economy switch? To answer this question I am looking at a ton of data. While I thought last fall that 2009 would be the year of a weakening USD and rising commodity prices, now I am not so sure. The Fed clearly has a vested interest in halting deflation and quantitative easing will, at some point, ensure that this happens. The creation of a “Bad Bank” also will go a long way towards recapitalizing the system. This is not the 1930s… the level of intervention/interference is exponentially greater.

    Fear and greed, as I posted yesterday.

         
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    Posted: 21 January 2009 01:36 PM #41

    chartguy - 21 January 2009 05:17 PM
    Mace - 21 January 2009 05:01 PM

    chartguy,

    Is AAPL a small cap?  You’re reading a small cap research report right?

    No, AAPL is not a small-cap. But again, I am looking for data points on the macro environment (as suggested by my post re: MSFT yesterday). Sorry to be confusing here. My investing/trading is based first on a general thesis and then supported, or not, by TA. At this point I am trying to develop a general thesis for 2009. I can make a reasonably strong case for a retest of the S&P lows and I can make a reasonably strong case for a muted rally.

    I am grappling with the idea that we are in a period similar to 1973/74, as Eric has suggested previously, or something worse. The difference is that this time we have huge policy intervention and stimulus efforts. We have quantitative easing at a level that wouldn’t have been considered even 6 months ago. We have low yields, a strong USD and weak commodity prices. We have ongoing deleveraging at every level which has so far impacted housing most severely but likely will take a bigger bite out of commercial real estate, credit cards, auto loans and student loans. Alt-A resets are set to peak in 2010 and the repercussions could be greater than for sub-prime. And we still don’t know what junk is still hidden on the banks’ balance sheets.

    Said differently, we are in a period of deflation. This encourages people to pay down debt and delay purchases. (Inflation does the opposite.) So the question I am trying to answer is simple: when does the economy switch? To answer this question I am looking at a ton of data. While I thought last fall that 2009 would be the year of a weakening USD and rising commodity prices, now I am not so sure. The Fed clearly has a vested interest in halting deflation and quantitative easing will, at some point, ensure that this happens. The creation of a “Bad Bank” also will go a long way towards recapitalizing the system. This is not the 1930s… the level of intervention/interference is exponentially greater.

    Fear and greed, as I posted yesterday.

    In other words, if you’re early, you’re wrong.

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    Black Swan Counter: 9 (Banks need money, Jobs needs a break, Geithner has no plan, Cuomo’s grandstanding, .Gov needs a hobby, GS works for money, flash crash, is that bubbling crude?).

    For those who look, a flash allows one to see farther.

         
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    Posted: 21 January 2009 01:37 PM #42

    Back to today’s earnings: do most of you, erm, think Andy is smoking crack?

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    Ah, love, let us be true to one another! for the world… hath really neither joy, nor love, nor light, nor certitude, nor peace, nor help for pain

         
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    Posted: 21 January 2009 01:39 PM #43

    chartguy - 21 January 2009 05:17 PM

    ... the question I am trying to answer is simple: when does the economy switch? To answer this question I am looking at a ton of data. While I thought last fall that 2009 would be the year of a weakening USD and rising commodity prices, now I am not so sure. The Fed clearly has a vested interest in halting deflation and quantitative easing will, at some point, ensure that this happens. The creation of a “Bad Bank” also will go a long way towards recapitalizing the system. This is not the 1930s… the level of intervention/interference is exponentially greater ...

    In other words, market might recover earlier than expected because of exponentially greater government intervention, right?

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    Posted: 21 January 2009 01:40 PM #44

    Mace - 21 January 2009 05:39 PM
    chartguy - 21 January 2009 05:17 PM

    ... the question I am trying to answer is simple: when does the economy switch? To answer this question I am looking at a ton of data. While I thought last fall that 2009 would be the year of a weakening USD and rising commodity prices, now I am not so sure. The Fed clearly has a vested interest in halting deflation and quantitative easing will, at some point, ensure that this happens. The creation of a “Bad Bank” also will go a long way towards recapitalizing the system. This is not the 1930s… the level of intervention/interference is exponentially greater ...

    In other words, market might recover earlier than expected because of exponentially greater government intervention, right?

    Yes.

    (Not sure what this does to your EW analysis.)

         
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    Posted: 21 January 2009 01:42 PM #45

    Winterpool - 21 January 2009 05:37 PM

    Back to today’s earnings: do most of you, erm, think Andy is smoking crack?

    He is certainly high.  I’ve printed out the relevant pages for comparative evaluation.

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