Crosscurrents
Yesterday I felt that the market action was indicative of a bull market - strong follow up to an otherwise tough down day. But by the end of the day, the weakness crept in again, breadth & new highs:lows were lousy, demand declined, concerns about financing (see EXPE's failed wannabe LBO) & subprime fears (see BSC, LEH, GS, MER) continued, and earnings began to weigh on stocks.
Today AAPL is getting hit hard -2.7% on WSJ reports that T activated only 146,000 iphone subscriptions the last two days of June. The street was thinking 700,000 phones sold that first weekend. But, the rollout occured Friday evening June 29. That left an evening and a day for T to record new subscriptions. Yet 146,000 seems light when 700,000 was the forecast for the first full weekend so the stock is selling off. AAPL earnings are due this week and now grey clouds are on its horizon. Usually I like when strong stocks decline into an earnings report but AAPL is a large position so its a little tougher to stomach. 6 weeks ago the same happened with RIMM and we benefited hugely from that insight. GOOG is probing the lows after its earnings miss. Very much the dead cat bounce there. TXN is down 3.5% after an earnings miss citing lower demand for cellphone chips. Are they kidding or braindead down there in Texas? But this is the earnings season we have inherited.
And then there is the issue of bank stocks and financial stocks. Bank stocks are acting like death, insurance stocks are arguably worse, & investment banks are in the same league. The only thing acting well in financials are asset managers but even they are hit or miss (see IVZ vs LAZ). If the money guys are getting hit it always seems to be tough sledding in the overall market.
Another item to note is small vs large cap. True, the small cap indices are only down 4% from their highs. And mid caps are only down 3%. But both of those have sold off to the lower end of the recent range. Large caps on the other hand are down about 2% but are holding their heads up higher and stronger. If this trend continues the best action will be in large caps for the next move. The caveat being that the market wants us to think "If there is one."
The well managed portfolio is now being pruned (again and again...) so that losses do not stub our toes too badly. Positions are being reviewed for relevance so that the next rebalance may dig a little deeper. Holding the right stocks in the right proportions is critical and that's what we are after.
The decline should last another day or two and or another 1/2 - 1%. Then the rally bears close scrutiny for further cracks. If they continue then a little deeper pruning should occur.
Stay tuned...
Today AAPL is getting hit hard -2.7% on WSJ reports that T activated only 146,000 iphone subscriptions the last two days of June. The street was thinking 700,000 phones sold that first weekend. But, the rollout occured Friday evening June 29. That left an evening and a day for T to record new subscriptions. Yet 146,000 seems light when 700,000 was the forecast for the first full weekend so the stock is selling off. AAPL earnings are due this week and now grey clouds are on its horizon. Usually I like when strong stocks decline into an earnings report but AAPL is a large position so its a little tougher to stomach. 6 weeks ago the same happened with RIMM and we benefited hugely from that insight. GOOG is probing the lows after its earnings miss. Very much the dead cat bounce there. TXN is down 3.5% after an earnings miss citing lower demand for cellphone chips. Are they kidding or braindead down there in Texas? But this is the earnings season we have inherited.
And then there is the issue of bank stocks and financial stocks. Bank stocks are acting like death, insurance stocks are arguably worse, & investment banks are in the same league. The only thing acting well in financials are asset managers but even they are hit or miss (see IVZ vs LAZ). If the money guys are getting hit it always seems to be tough sledding in the overall market.
Another item to note is small vs large cap. True, the small cap indices are only down 4% from their highs. And mid caps are only down 3%. But both of those have sold off to the lower end of the recent range. Large caps on the other hand are down about 2% but are holding their heads up higher and stronger. If this trend continues the best action will be in large caps for the next move. The caveat being that the market wants us to think "If there is one."
The well managed portfolio is now being pruned (again and again...) so that losses do not stub our toes too badly. Positions are being reviewed for relevance so that the next rebalance may dig a little deeper. Holding the right stocks in the right proportions is critical and that's what we are after.
The decline should last another day or two and or another 1/2 - 1%. Then the rally bears close scrutiny for further cracks. If they continue then a little deeper pruning should occur.
Stay tuned...
posted by David Geller at 11:46 AM
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