AM: Anticipating employment

MARKET BEHAVIOR

Seems we are in a holding pattern after yesterday’s whipsaw action and anticipating tomorrow’s employment numbers.  It is still early in the day and the markets could make a break one way or the other, but so far things are steady to slightly positive.

MARKET SENTIMENT

Is this the calm before the storm?  What will send us higher or drop us lower?  The impact of Sandy will be in this employment  survey as business and consumption on the east coast was interrupted.  But everyone already knows that, so rational expectations will be for a weaker number.  Of course if the market is predisposed to selling off, it could use that weak number to justify liquidating shares.

The interesting thing to watch is if the employment will be the catalyst to get this market moving again, either up or down.  The Employment Report will be long forgotten by late morning as traders refocus on political risk, but if employment kicks off a wave of buying or selling, it could last for a couple of days.

TRADING OPPORTUNITIES

Currently we are pushing back toward the 50dma.  Holding above that key psychological level would be bullish, but don’t buy the first break above the 50 and wait to see if the breakout fizzles and reverses again.  There is more profit potential by being early, but there is also significantly more risk and more often the risk/reward doesn’t pan out of the overly-agressive trader.

A market refreshes itself by either pulling back, or trading sideways.  We came a long way in a short time the last few weeks and one way to clear the path higher is pulling back to the 200dma, the other is churning here for a bit.  A couple of months ago we churned above 1400 for a month before making a 50 point surge in just over a week.  I’m bullish over the intermediate-term, but more cautious here.  This is a great place for a value investor with a 6+ month time horizon to buy in.  For a more nimble trader, wait for the market to make its next move because you might see modestly more attractive prices if the coming days.

It seems a lot of traders are adjusting their portfolios for non-fundamental reasons, namely tax motivated selling.  This selling could create a buying opportunity leading into next year as stock rebound from this artificial inflation of supply.  And beyond that, we could see this same money pumped back into the markets in the near future.  What was weakness becomes strength.

INDIVIDUAL STOCKS

AAPL is having a wild ride today.  It gapped lower at the open and traded as low as $518 before rebounding back to $550.  There is a truckload of emotion tied to this stock right now and many of the investors who had a set-it-and-forget-it mentality regarding AAPL are freaked out right now.  Their sure-thing doesn’t feel so sure anymore.  Anyone who bought in the last 10 months is sitting on a loss.  How can it be possible to lose money on the surest of sure things?   While there is a lot of talk about tax selling, the thing people are overlooking is there are hundreds of millions of shares underwater right now, many of those held by late-to-the-party retail investors.  This kind of flush out isn’t surprising and is clearing the deadwood.  I’m not an AAPL bull and don’t know how much more upside is left in this name, but I think this selloff is getting out of hand and is creating a buying opportunity.  Buying here is catching the kinife and that is rarely a good idea, but if someone was wiling to hold for 6-12 months, they will be rewarded by stepping in front of this un-fundamental selling.

Stay safe