ITZ Update: S&P 500

 Subscribe in a reader

S&P500 has put in a quick rally since the November 16th reversal, we could see a near term pullback towards it's 200-dma.

click on chart to expand image

Index Chart Observartions

 Subscribe in a reader

ITZ observations on several index charts

AAII Bearish Sentiment Declines From Multi-Month High

 Subscribe in a reader


This week's AAII Sentiment Survey reversed after nearing 50% on Bearish Sentiment last week, closing down 8% to 40.8; while the S&P500 rose 38 points.  LINK

Bullish	35.8%
Neutral	23.4%
Bearish	40.8%

Link to last week's chart

Apple: Over Sold Bounce?

 Subscribe in a reader


Nice reversal on Apple as noted last week Link

Was Friday's reversal an oversold bounce or a generational low? ITZ believes the later... Apple was insanely oversold and trading at a cheap valuation pe & ex-cash. Below ITZ has highlighted upside resistance levels.

Update: ITZ Portfolio

 Subscribe in a reader

Update ITZ Suggested Trades:

Back on October 15th ITZ posted this follow up LINK  *read comments section

Current positions in stocks are as follows:

Apple (AAPL) entered 1/4 positions  $539 on 5/17; $588 on 7/23; $572 on 7/25 & $626 on 10/9

ITZ has also been trading call options: Read comment section LINK --- currently fully invested in AAPL April $650 Call leaps entered 1/4 position @ $11.30, $10, $8.30 & $9 avg cost $9.65  closed Friday @ $11/$11.65 lets raise stop to $10.

Proshares Ultra Crude Oil (UCO) entered 1/4 positions $32 on 9/19 & $31 on 10/11 & 1/2 position @ $29.75 on 10/15

Follow ITZ on Twitter for upto date trades

Summation Index

 Subscribe in a reader

Markets could see another volatile week as investors remain anxious about the “fiscal cliff” and watch escalating tensions in the Middle East. Bernanke speaks Tuesday at the Economics Club of New York, could also elaborate more on the Fed’s effort to change its communications policy. The Fed has been discussing more definitively connecting its interest rate policy to specific levels for unemployment and inflation.

Then  housing data Monday and Tuesday, and jobless claims and consumer sentiment Wednesday, ahead of the Thanksgiving holiday Thursday.  Stocks closed higher Friday after Congressional leaders made encouraging comments about negotiations on the fiscal cliff.

The question remains however...has a bottom been put in? ITZ noted several indicators last week and in today's post takes a look at the Summation Index. Link

 The original "classic' SI maintained that +1000 neutral level -  the modern version  Ratio Adjusted Summation Index (RASI) uses the more natural zero level as the neutral level. The RASI factors out changes in the number of issues traded, making it better for longer term comparisons and analysis.

When the Summation Index crossed down through +1000 back in May 2012, the price bottom marked by that event was a bit early for the final bottom, but it was a bottom nonetheless.  
Now we are seeing another downward crossing through the +1000 neutral level, just as the market seems to be reaching the conclusion that taxes are going higher, and earnings are going to fall, and money will dry up, and the economy is driving off a cliff!!!  

As for the RASI, we need to not only see a reversal, but a cross above the +500 to confirm any rally.

Below are the NYSE & NASDAQ Summation Indexes both original & Ratio adjusted.

Apple At Pivotal Level

 Subscribe in a reader

ITZ posted the following Apple Ex-Cash chart this past weekend Link

Below is a weekly Apple chart, noting the earnings, high & low p/es as well as the Ex-Cash ranges as noted in the above link. Apple tested a key support level today around the $520 / $525 area.

Bottom line we could see some more downside, but the risk-reward is favorable for +50% gains in 2013. ITZ has suggested entry levels as well as trading call option leaps. Current market sell off due to uncertainty over the 'Fiscal Cliff' has presented extreme over sold conditions. Pessimism is high as noted in AAII survey this week LINK

Bearish Sentiment at Multi-Month High

 Subscribe in a reader

This week's AAII Sentiment Survey is nearing 50% on Bearish Sentiment. The AAII Investor Sentiment Survey measures the percentage of individual investors who are bullish, bearish, and neutral on the stock market for the next six months; individuals are polled from the ranks of the AAII membership on a weekly basis. Link

Bullish	28.8%
Neutral	22.4%
Bearish	48.8%

Bearish % is closing in on 50%, an extreme reading, having done so a half-dozen times over the last 4 years. At the market bottom back in 2009 with the S&P500 at 666 the Bearish indicator hit 70%. Is this the bottom? Well I wouldn't suggest now is the best time to short the market.

"The time of maximum pessimism is the best time to buy" Sir John Templeton

Apple...Back Up The Truck!...BUY!!!!

 Subscribe in a reader

Apple’s revenues –which it recently forecast would grow to $52 billion – makes its fundamentals attractive enough to lure back skeptical investors. For that reason, Brian White, analyst at Topeka Capital Markets, thinks the stock could soon vault above $1000 per share once the pessimism lifts. Read More

Doug Kass: Time to Buy Apple Again link 
UBS hardware analyst Steve Millunovich today reiterates a Buy rating on shares of Apple link

ITZ has suggested buying Apple at several levels since May as a long term core holding in 1/4 position increments: May 17th $539; July 23rd $588; July 25th $572 & recently Oct 9th $626.
Also having traded call options.

Chart below looks at Apple's cash position & ex-cash valuation, currently at extreme low valuations.

click on chart to expand image

Past ITZ Apple posts:
 Apple Update: Q4 Earnings Report
Apple Pre-Earnings Outlook 10-6-12
Apple Misses Earnings...Now What?

 

Dow Jones Industrial & SP500 @ 200 ma

 Subscribe in a reader

Apple & SP500

 Subscribe in a reader

Apple Update: Q4 Earnings Report

 Subscribe in a reader


Apple reported Q4 2012 earnings Thursday with revenue of $36 billion was right on target, but EPS of $8.76 was lower than the expected $8.81 (although Apple’s own guidance was for EPS of $7.65). Also worrying investors was Apple’s forecast for the next quarter: EPS of $11.75 on revenue of $52 billion, both also lower than had been expected.

The stock peaked at $700 last September and had declined $70 already prior to earnings. Then Friday came within a few points of testing it's 200 day moving average.

Investors are getting worried with two consecutive quarterly misses. Why the slipping profit margins, and why the lower-than-expected revenue in the next quarter despite a slew of new products? Is demand waning for iPhones, iPads and Macs?

For Apple it's not a 'demand' issue but instead a supply problem, which most companies wish they had! Actually, that huge array of new products announced and/or released this quarter is a primary reason behind the slipping numbers. During the earnings call, Tim Cook stated that this has been Apple’s most prolific quarter ever in terms of new product releases. Key Apple gear went on sale in Q4, including the highly anticipated iPhone 5, a collection of new iPods and a class-leading Retina display 15-inch MacBook Pro. As the quarter wrapped up, Apple announced the iPad Mini, another Retina MacBook Pro, a new full-size iPad, an updated Mac Mini and a redesigned iMac that pushes the envelope for a consumer-level desktop PC.

All of these new products entail ramp-up costs, and Apple’s continued focus on cutting-edge design appears to be leading to higher production costs, regardless of any favorable supply and manufacturing terms Apple may have negotiated. Even though the latest round of new products may not go on sale until the next quarter, in most cases Apple has been producing them through Q3, building up a sufficient quantity to meet launch demand.

As the company approaches the final two months of the year, the oldest product for sale in Apple’s mobile lineup will be the 15-inch MacBook Pro with Retina display, which has been on the market for a mere four months. Apple is also selling an iPhone 5 and iPod Touch and nano that are just one month old, and November and December will bring a brand new iPad, iPad mini, iMac and Retina 13-inch MacBook Pro. It’s probably the biggest single product turnover Apple has ever done in such a short amount of time.

Apple is stressing that accepting lower margins and being behind on production is only temporary and that it plans to get its costs down as soon as possible.

ITZ believes Tim Cook has set a low bar on Apple's upcoming quarter as well as the year ahead. They've mastered the art of sandbagging earnings estimates. What Apple is setting up instead is perhaps record sales and revenues, as shoppers find an array of new products to buy and upgrade. While at the same time Apple will see supply issues and cost diminish.

Three weeks ago ITZ gave a pre-earnings outlook LINK bringing down FY 2012 to $44.38, it actually ended up being $44.15. ITZ also called for a test of the 100 ma around $617...we saw a low yesterday of $592 close to it's 200 ma. But rallying and briefly up on the day before closing at $604.

ITZ maintains FY 2013 estimate eps of $57 & revenue of $220B for 2014 $64 eps & revenue of $240B. Let's not forget as noted in the last Apple post... it has $125 per share in cash and with the stock trading around $600 it is selling at 8.4xs ex-cash next years estimated earnings. ITZ maintains a 2013 price target of $850 or 15xs eps. Use this correction to BUY!

 

Apple Forecasts $52 Billion For Holiday Sales