Apple (AAPL) missed!
Fortunately, we were well-prepared for this eventuality as I had said way back on July 10th, in member chat, that AAPL was "too big to succeed" (commentary also featured in Stock World Weekly on the 15th). I also said, at the time regarding AAPL: "Where was my buy point - $555? That's a long way down to support if they fail $600." We had called for taking the bullish AAPL money and running the previous Thursday (July 5th) in my morning alert to members, as they topped out that morning at about $610. We were a bit early with that call (AAPL hit $619.87 the next week) but, on the whole, our bearish flip on AAPL (and the broader market) has served us well.
In yesterday's member chat, we had one bearish earnings spread on AAPL as well as an aggressive play on SQQQ, the Nasdaq ultra-short, because we expected the Nasdaq to fail along with AAPL (and Amazon (AMZN) is next!) on earnings. Our SQQQ trade grabbed the Sept $50/60 bull call spread, offset by short puts on some stocks we are accumulating for our Income Portfolio for a net free trade but our dreams of a big pay-off on the spread will be put on hold today as a sudden burst of stimulus talk has turned the indexes back up, with the Dow now 200 points off the bottom in the futures (7:50) at 12,660.
I already sent out an alert to our members this morning, pointing out what manipulated BS this was as the WSJ's Jon Hilsenrath issued what amounted to nothing more than some well-timed speculation on imminent Fed action into yesterday's close that has been picked up by the MSM as a fact and popped the Dow a full 100 points into yesterday's close - erasing half of a disastrous day in minutes (see Dave Fry's SPY chart). At the moment (7:54), the Dow Futures (/YM) make an excellent short below the 12,650 line so excuse me while I hit "publish" on this partial post so our members can see it.
Anyway, so where was I? Oh yes, market manipulation by Uncle Rupert and the WSJ is not unexpected with News Corp. (NWS) reorganizing and looking for good valuations on the company split. I pointed out to members seven other articles in which Hilsenrath has cried "Wolf" or, in this case "QE3" in the past two months - each time, coincidentally, I'm sure, right when the market needed a little push.
That was followed by an IMF release that urged China to "boost consumption," a statement from Japan's Finance Ministry that Yentervention has been effective and they're ready to do it again and ECB Council Member Ewald Nowotny telling Bloomberg (in case they didn't run the WSJ opinion as a fact) that "there are pro arguments for giving the eurozone's ESM permanent rescue fund a banking license," which would essentially allow the ESM to lever up their $1Tn 8-10 times - how's that for a stimulus rumor?
Of course this all sent the markets flying and no arrests will be made but I warned our members to take this with a Lot's wife-sized grain of salt, saying:
What complete BS. What's really scary is how coordinated this is. There are men who meet in back rooms and make the phone calls that pull the strings that jerk the global economy back and forth.
Once again, just talk from the G20 - no concrete action so it's a sugar rush and nothing more - we'll just crash again as soon as the buzz wears off if no actual action is taken but a good example of how you can't ever have all your eggs in one basket in this market and why I like to have just a couple of eggs in play with the other 10 eggs safely in the container - where we can always get them if we need them but first - let's just try to master juggling two in this market chop.
So the game here is to get you to believe that the Dow's rising 200 DMA is strong support and you should ignore the fact that the 50 DMA is about to crash right through it in what many TA people consider a pretty bearish signal. Note the stronger volume on the sell-off, with our best days of the month coming to the downside and now we'll see (assuming it sticks) what kind of volume conviction an up move might have today.
I say IF it sticks because, so far (8:15), I'm not too impressed with the very small bump in the Futures (0.5-1% with the Nas still down 0.5%) we're getting from such a massively coordinated set of stimulus rumors (no actual stimulus, just rumors). That's just not a good sign if we can only fool some of the people all of the time because we've been fooling all of the people some of the time for ages and most of them are sick of it and now we're just left with some fools who can be suckered in all of the time but - what happens when they run out of money - or patience?
Note on Dave's EWP chart for Spain that we just failed long-term support at $20 (the 2009 spike lows) with a big 5.45% dip yesterday. Italy is no better (EWI) and the BRICs are failing too with commodity prices back in the toilet as global demand slows.
While the MSM in America celebrates our housing recovery (down 80% to 20% and now up 2% to 20.4% - woo hoo), France is falling off a cliff with first-half mortgage lending dropping 33% from last year, which wasn't so hot either. The decline can be attributed to a collapse in demand, a lack of government aid, and a reduction in lending as a result of refinancing difficulties at banks - none of which are likely to get better in the second half.
Meanwhile, the IMF, in the above-mentioned report, said China's slowing economy faces significant downside risks and relies too much on investment. China is currently flooding the steel market by exporting it at at the highest level in two years, exacerbating a global glut that may hurt competitors. Monthly shipments abroad rose to 8.7% of domestic output last month, the highest proportion since July 2010. Chinese steel mills, set for a record production in 2012, are ramping up overseas sales to avoid a softer domestic market, where prices for the commodity have dropped to a two-year low. Steel is a relatively minor issue compared to the unused copper that is stockpiled in China - God help us all if they begin to release that!
Typical of the BRICs (who we are short on), Russia's economy is more vulnerable to the effects of the eurozone's fiscal and banking crises as commodity prices fall, according to the European Bank for Reconstruction and Development. Starting in October, the EBRD slashed growth forecasts for eight economies in Central Europe, or CEB, and the Baltics and seven economies in Southeastern Europe, or SEE, citing their close trade and financial links to the eurozone.
The global slowdown is blowing back to Japan, which had a 2.3% annual decline in exports and, with an export-driven GDP - well, you do the math... Ambrose Pritchard warns "Europe is sleepwalking toward imminent disaster" echoing Hugh Hendry's comments we discussed last Wednesday that " Bad things are going to happen." Pritchard and Hendry are not Nouriel Roubini - people who see doom and gloom around every corner. Neither am I for that matter but when I look around a corner and I do see DOOM - what do you expect me to tell you?
Einstein said "If you are out to describe the truth, leave elegance to the tailor" and Buddha said "There are only two mistakes one can make along the road to truth; not going all the way, and not starting." Let's not ignore what's going on in the world just because it is unpleasant and uncomfortable. I see my reader numbers dropping off every day I fail to come up with something bullish to say but, fortunately, I have set up my business where I don't have to be a whore for ratings - but that is the entire business model of the MSM.
Be very careful out there.
Additional disclosure: Positions as indicated but subject to change (we expect to add shorts at the open).