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Bulls Once Again at February Highs

Apr. 21, 2011 10:25 AM ETAAPL, SPY
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Seeking Alpha Analyst Since 2011

Assistant Editor Nextoptions.com

9:00am (EST)

It has been a wild and volatile shortened week for the market with today's action leaving us on the brink of watching a good movie end.  Things started off scary on Monday after the major averages got slammed by the bears on an S&P downgrade of U.S. debt.  On Tuesday, the bulls battled back and recouped a portion of the losses ahead of the bombshell of scheduled earnings after the close and before Wednesday's open.  
The bulls had a tremendous session yesterday as the major indexes soared 1.5% on the heels of a number of positive earnings surprises which pushed the Dow to new 52-week highs.  Although the S&P and Tech are still lagging from hitting their highs, they are close. There is a chance for a continued run higher as the earnings parade continued last night and into this morning.  More on this in a minute...
The Dow soared 186 points, or 1.5%, to finish at 12,453.  The index touched a high of 12,475 and came within spitting distance of reaching our near-term target of 12,500-12,600.  The blue-chips touched a low of 12,093 on Monday which fell in between our downside targets of 12,200 and then 12,000.  This represents a nearly 400-point swing from lows to highs this week.
The S&P 500 jumped over 17 points, or 1.4%, to end at 1,330 after reaching a high of 1,332.66.  We said to watch for 1,325 (check) and 1,334 yesterday but the index once again ran into trouble at the 1,334 level. This level represents a 100% move from the March 6, 2009 low of 666.79.  The S&P reached a low of 1,294 on Monday which really threw us for a loop because we felt the momentum was there for a push down to 1,275-1,250.    
The Nasdaq zoomed 57 points, or 2.1%, and settled at 2,802.  Repeat...2,802.  After failing to close above the 2,800 level for weeks (and months), Tech reclaimed this important psychological level for the first time since mid-February after falling to 2,706 on Monday.  This was just above our near-term support of 2,700-2,650 and we also felt Tech would fall through support. We have mentioned there is chance for a run up to 2,850 if support did hold Monday morning and the triple-digit gain off the lows has the index right there.
In fact, here were our thoughts on Monday morning:
"The Dow is up 20 points for April while the S&P 500 is down 6 points.  Tech is down about 17 points.  So far, April has not delivered the results the bulls have been hoping for as the crosswinds have slammed us back into a trading range.  If we pencil in the historic 2% April average gains for the indexes then we get Dow 12,500; S&P 1,355; and Nasdaq 2,820 by month end.

Yes, we do a lot of homework and chart work but it’s pretty crazy how that last paragraph just comes together and makes a compelling argument for one last bull charge as we head into May which happen to be our upside targets.  However, a 2% move the other way puts the S&P below 1,300."  (END)
Folks, the last two sentences in the last two paragraphs say it all. We got whipsawed this week.
As far as how things are looking this morning, Apple (AAPL, $342.41, up $4.55) was up $10 in after-hours last night after crushing Wall Street's estimates.  The company reported a profit of nearly $6 billion, or $6.40 a share, versus $3.1 billion, or $3.33 a share, in the year-ago quarter.  Revenue came in at $24.7 billion.
Analysts were looking for earnings of $5.39 on sales of $23.4 billion.
It was another solid quarter for Apple which pretty much doubled year-ago results.  That's what happens when you sell over 18 million iPhones, 9 million iPods, 4.7 million iPads, and 3.8 million Macs in a quarter. However, two key things to points out. iPad missed expectations as Wall Street was looking for over 6 million units to be sold but in fairness to Apple, their supply chain wasn’t running at 100%. Also, iPod sales were expected to come in at nearly 10 million so they missed there as well. The company did beat on iPhone and Mac sales. 
As usual, Apple sandbagged their numbers going forward and lowered guidance but all of the positives clearly outweigh any negatives. One thing we are disappointed in was the fact there was no stock-split. A 5-to-1 split would get shares under $100. Come on Stevie, give us a split or pay the shareholders a dividend with the $65 billion in cash Apple has in its coffers. 
Futures are up so if we get a breakout, we will go over some of our thoughts from February in our afternoon update or Weekly Wrap which comes out on Sunday’s. As we head to press, here is what we look like:  Dow futures (+27), S&P (+x5), Nasdaq 100 (+18).  Subscribers, check the Members Area for the latest updates.

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