AAPL blew away estimates again and is single-handedly lifting the market today. Most of AAPL’s strength comes from iPhone sales in China as they missed iPad and Mac expectations. The one upshot is these quarterly results don’t include a Chinese release of the new iPad, which will provide a big boost for next quarter’s results. But AAPL is warning of a slowdown in iPhone sales going forward as customers hold-off in anticipation of an iPhone5.
As for how this affects the rest of the market, we are experiencing a nice pop today and all three major indexes retook their 50dma, but are still within the previous consolidation range, so not a technical breakout yet. Today’s 1% and 2% gains are great to see after the recent weakness, but don’t constitute a follow through day because declines over the last few days reset the rally count. This is day two for the S&P500 and day one for the NASDAQ. We need a strong follow through day on Friday or next week to signal this market is ready to rebound.
And given where we are, it seems prudent to allow the market a couple days to prove itself since today’s rally is the result of a single company. The challenge will be to see if AAPL’s results can reverse the bearish sentiment we’ve seen in the markets as of late. Is AAPL stronger than the markets, or are the markets stronger than AAPL? And of course it doesn’t have to be an either/or as AAPL could decouple from the markets and continue higher in the face of wider weakness.
But again, sit tight and wait for that confirmation to demonstrates it is safer to venture into the market. We give up some profit by waiting, but we decrease the risk of losing money by being patient.
Jani Ziedins (pronounced Ya-nee) is a full-time investor and financial analyst that has successfully traded stocks and options for nearly three decades. He has an undergraduate engineering degree from the Colorado School of Mines and two graduate business degrees from the University of Colorado Denver. His prior professional experience includes engineering at Fortune 500 companies, small business consulting, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two children.