The market may of put in a short-term bottom but it’s difficult to tell 🙂 I mentioned early last week that the market tends to normalize into a holiday weekend which it did with aplomb. We’ll have to see how things play out over next week. I would not be surprised to see a test of the S&P Futures down to around the low 1840’s first, it’s just basic auction theory. If things hold then i would not be surprised to see a run to 2000 or close to it from here.
Watch the significant support levels where that dip last week ripped down to, it’s pretty key and a great line in the sand with which to position yourself around. On the upside, 1865 approximately and then 1885-1892.
I had a pretty good week, picked up stocks on the dip and riding things up but i’m still hoping we do get some kind of surprise flush into the upper 1700’s so i can load up on more bargains.
Anyway, here is the daily /ES mini futures chart from the end of the trading.
You can clearly see where the auction failed to push through and buyers piled in ( or shorts covered ), we’re now back at the normal range and we have a ton of catalysts from earnings coming up, the big one for me is of course AAPL which reports on April 23th.
Given that AAPL can move the S&P due to it’s weighting, let’s look at the chart ahead of earnings.
You can see the pennant coming to a head which often implies some kind of breakout is due. Options on AAPL for May are currently expecting a 27$ move in the stock price after the report. This is never 100% obviously, there is always a chance of upside or downside surprise that is impossible to factor in but it is a useful yardstick for technical analysis.
That old phrase ‘be careful what you wish for’ is kind of screaming at me here because i honestly would love the stock to flush out weak longs down to the $460-$480 level that i was hoping for – you can see the $510 zone that i mentioned a few weeks back where big money stood ground and of course the 200 sma is rising right below.
What else do we know? Well we know this will be a weak quarter but analysts appear to be dropping their expectations all over the place so the chance of a ‘beat’ is increasing, we know big activists like Carl iCahn have been loading up with energy around the 500 level. We know Apple is ‘cheap’ relative to everything else in the sector and we know there are catalysts on the horizon. Apple has it’s June WWDC conference in about 8 weeks which will possibly provide some clues but the big catalyst will be the phone and any other surprises in the fall.
With that in mind, i will be opening up some more positions on AAPL after earnings on any weakness with the hypothesis that the big money will drive this up to 590-600$ ( possibly coinciding with 2000 or so on the S&P). I’m not going to jump in ahead because the options premium isn’t worth paying here and it is impossible to tell how the stock will react given the current chart.
Key levels to watch are the $540 and $510.
Here is a daily of the nasdaq which shows the rebound that ensued…
The nadsaq took more of a beating than the S&P and the bounce is not insignificant, a big tech miss could flush this hard again and it wouldn’t surprise me in the least. The ‘correction’ has still been light on the S&P so patience is key, need more information.
This stock is acting extremely bullish in my eyes. The book value is only 70% of where it should be. The CEO warned on the last earnings call that things will take a while to push through, i.e. bringing down down costs and so on so the stock is in a holding pattern. There is plenty of support around this 49-50 level but the stock does suffer a bit when the market does come down. Use it to buy any weakness for the long haul. I have options and stock on this one. There has been some interesting activity on AIG way out on the $60 strikes for next year so i’m sort of playing to the tune that someone else thinks the same and is loading up for the long term. Earnings are early May.
And finally, Boeing..
A major down component and clearly bounced off the 120 level, lots of support that can be seen. It looks like it is probably going to have a crack at the 135-140 level at some point, especially if the broad market takes out the 1892, it’ll probably happen together. Maybe a bit of softness in the short term. Great long term hold.
Dividends and all the rest
Coming in around the expected $400-$500 range again but everything is going to go nuts in May as a ton of my portfolio pays out then, i’m hoping for new records but we shall see. Either way, it’s great to see things growing at a nice pace. I’ve also achieved the vast majority of financial goals that i set out for December 2014 – pleasantly surprised so i need to go back and set some more, a nice problem to have.
Finally, i’m not far off embarking on another income generating strategy with options and my broker in the US, i’ll be charting how that goes once it is up and running but the trial run so far has been looking great.
Have a great weekend.
Image courtesy of FrameAngel / FreeDigitalPhotos.net