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Is an AAPL stock split in the making?

Today AAPL has a shareholder meeting and a lot of the focus has been on the replacement of Steve Jobs and the lack of information that AAPL is releasing about their succession plan. I believe that news stories are just the markets way of manipulating prices to where traders want them to be, which is why I believe so much in my levels.

AAPL closed right on the 50 day SMA yesterday and as of this writing is up $2.89 after a $12 drubbing yesterday. To me this signals the potential for a big announcement today at the meeting. Their last stock split was February 28 , 2005 and was a 2 for 1 split but of course AAPL has seen crazy growth out of their stock price since then.

The AAPL board is made up of smart people and they know that a stock split could deflect alot of the bad press about Jobs and their succession plan so today makes a lot of sense. It certainly would make for an intereting day.

Happy Trading!

Steve Jobs is no Moammar Gaddafi

Steve Jobs does not equal Moammar Gaddafi

In between news of riots in Libya, Gaddafi saying he will die a martyr, rallies in Wisconsin, Idaho and Indiana, and general apocalyptic signals, Apple (AAPL) made some news of its own.  This morning started with FBR Capital analyst, Craig Berger, telling investors that the iPhone 5 may be delayed after channel checks indicate bottlenecks at casing and touch suppliers.  Berger suggested that the iPhone5 may now ship in September which throws off Apple’s usual mid-summer new product reveal.  The note went on to temper this news by saying that iPhone production for this calendar would be “much stronger” than expected, coming in at 100 million units.  The white iPhone and availability of the phone on Verizon Wireless are notable factors in these better-than-expected numbers.  Berger also quoted an anonymous source that told him internal iPad sales targets at Apple are more like 45 million for this year than a prior expectation of 38 million.  So overall I would say that Berger’s note is bullish for Apple – iPhone5 may be late, but demand for the iPhone and iPad seem to be nothing if not healthy.  Nonetheless, AAPL stock began the day down and ended the day on its lows, down about 3.4%.  Sure the market was down, but it probably didn’t help that a video of Steve Jobs looking gaunt (to say the least) after some chemo started circling the web.  In these times where US citizens and Middle East citizens are so adamantly opposing their leaders I have to give Steve Jobs some credit – not only is he not being overthrown, his shareholders are upset by the prospect of him leaving.  Nice job Steve!

The Middle East and My Technicals

I was in Disney with the family over the weekend and not really focused in on geo political events unless you consider the Peter Pan /Captain Hook conflict a world changing issue. When I got to the airport yesterday I realized that the Middle East is in turmoil and that the markets took a sharp hit on this news.

I am a technician and to me the most important thing to do in this scenario is to stay devoted to my levels and what they are telling me to do. At this point in time this is no more than a nice pullback into levels that we could bounce from. So far we held and bounced from 1320, if we start to get deeper through that than I will have to reconsider.

Individual stocks have also come into levels that I would be happy to be a buyer, AAPL, GS and X are all at levels that make sense on a longer term chart. My specialty is technical analysis not mid east politics so I will stick to what I know and leave the rest to everyone else.

Happy Trading!

Barron’s Summary Feb 19, 2011

· The king of bonds” - Jeffrey Gundlach is profiled in Barron’s – he is pretty bearish on US equities, calling for the SP500 to hit 500 in the next few years.  He foresees more downside for muni debt and is pretty cautious on the US economy.

· Housing is a lot worse than people think – using numbers by Core Logic, which claims the headline National Association of Realtors existing home sales is inflated, numbers and trends in the market are worse than expected.

· INTC – article notes that Fred Hickey has become positive on INTC, due to a cheap valuation and decent fundamentals.

· Teton Advisors CEO Nick Galluccio – interview – pos. on FNFG, QLGC, GDP, ESIO, WASH, FFIC, HXL, WWD.

· NVDA, ARMH – negative comments – investors are getting way too enthusiastic about tablet growth forecasts; both these stocks are very expensive.

· MSFT, INTC, DELL – pos. comments; all these stocks are pretty cheap and reflecting pretty dire forecasts.

· HPQ – Barron’s says the Vertica purchase by HPQ raises conflict of interest questions as HPQ’s nonexecutive chairman, Ray Lane, owned a piece of the small software firm via his involvement w/VC shop Kleiner Perkins Caufield & Byers.

· Tech firms, inc. AAPL, MSFT, GOOG, CSCO, and INTC, should start paying 3% dividends.  They all have way too much cash, something investors aren’t giving them any credit for.  If INTC, one of the most capital intensive companies in tech, can pay a high dividend, than others should be able to.

· MF – pos. comments; as Corzine transforms the company, its stock price could climb to >$10.

· OMX – positive comments; the stock slumped after its earnings; but valuation is cheap and expectations are low; the results weren’t even that bad and mgmt could be conservative w/the guidance.

· LAB – one shareholder in LAB isn’t happy w/the terms of the deal and thinks the company is worth closer to $6.

· Cotton – the price may be vulnerable to a near-term correction although longer-term fundamentals remain positive.

· BioGaia – the Swedish biotech firm could become a takeover target for the likes of Nestle, DuPont, or Yakult.

· AGU – the stock could have more upside ahead – the shrs could hit prior highs of $115

· CVX – the stock could continue climbing as oil prices rise; the shrs could approach $110

· GIS: General Mills is mentioned positively by Barron’s. The article is positive on the company’s pricing power and R&D/innovation (among other things) and says that the stock could be up ~20% during the next 12 months (while also having a 3% dividend yield).

· NFLX: Netflix is mentioned cautiously by Barron’s. Barron’s had a negative call on NFLX in its Dec. 27th issue, and says, “while we have lost some (OK, a lot of) confidence in our timing, we think those concerns are still valid, and that Netflix, which fetches 53.7 times this year’s estimated earnings, could trade sharply lower in the next 12 months”

Could Tablet’s be the Next Bubble?

Fred Hickey certainly thinks so, Here are a couple excerpts from the letter:

I’ve seen a lot of crowded tech categories before, but this is comical. The makers will all build too much tablet inventory based upon their optimistic internal forecasts. That will lead to an epic glut and then a pricing bloodbath, as they try to give the stuff away. It should make for some great short-selling opportunities among the tablet component makers later this year. For now, we’re in the unbridled optimism phase for tablets.

Apple currently dominates the tablet market. Other than Samsung’s Galaxy Tab, there was virtually no competition for the iPad in Q4. Apple has first-mover advantage in the category and also has its App Store – which will make it difficult for newcomers planning to enter the market this year. Just how much competition will there be? An absolutely incredible amount. There are an estimated 80 to 100 new tablet models in development. Every PC maker (HP, Dell, Lenovo, Toshiba), every mobile phone producer (Samsung, LG, Nokia, Research In Motion, Sony Ericsson, Huawei, ZTE), every Asian network builder (Acer, Asus) and even the second largest seller of TV sets in the U.S. (Vizio) are planning to unveil new tablet models in 2011. And they’re all going to obtain 10$-20% market share. Here’s another example of what happens when there’s too much money floating around the world – it leads to mal-investment. In 2000 we had way too much fiber optic capacity built. In 2011, there will be way too many tablets built.

Hickey believes that the overpopulation will lead to price cuts as we have already witnessed with the Samsung Galaxy and I’m sure well see from Motorola when they figure out you can’t sell an $800 tablet when a better version of the same product is already offered.

I agree with Hickey as far as overpopulation and price cuts but I don’t see how this could be negative for the chip companies.  If this market does indeed blow up the chip companies should have business for some time.  If we’ve learned anything from previous bubble’s, they can keep going and going and going.

I am at a loss, Both in my P&L as well as the market

I am at a loss, both in my P&L as well as my understanding of the market. Perhaps it is time for me to hang up my trading gear. Hand it over to the next generation who are not set in the ways of the past. I have lost too much money in the last week as a bear. AAPL is down 1.2% and the NASDQ is up 21 basis points. If I don’t see a reversal today in the overall market by the end of the day I will be flat all my positions and stay off the keys for a month. It is very difficult to accept as; I do not believe m bearish perspective is steeped in emotion. My arguments are logical. I am shocked that portfolio managers have not sold into what has been the best opening 45 days of a fiscal year that we have seen in many years. Logic no longer prevails. Greed is the defining emotion. I have tried to stomach through it. Yesterday the firm made $25,000. Today we are down $42,000 at 12:47pm. We are net short. We are on the verge of either making what would be an R3 pivot signal ling a reversal and one would expect the market to move down. We are also 1 handle from making a new high on the futures. I have bet big for my last time this month. On the astrological futures trading forecast, we have very bearish indicators for the remainder of the day. I did not see the upward moves in the futures today as convincing. There was no amplitude. I have not seen a V reversal in a very long time. Tomorrow many managers will be out as they begin a long weekend. There is real geopolitical risk out there. It is only logical that managers would take risk off into the end of the day. So as they say, the stars seem aligned, but every time I have felt that way, nothing has come to fruition. I am exhausted from fighting the tape. I was up significantly in the first 5 days of the month and now find myself down significantly as we are close to the final week. The time has arrived. By the end of this day I will no longer be in this position of uncertainty. I will be out of the market for the foreseeable future, or vindicated.

10 Reasons the Stock Market is Delusional

The Stock Market is Delusional

A Delusional Market:

1. Leverage is a good thing. There is too much leverage in the market…Again. We are in a dangerous place.

2. Rates have moved up a bit, they wont move up more. Even with the move in rates, they are too low.

3. Equity multiples are low. We have seen no contraction of equity multiples. One of the greatest delusions in the market is that companies can continue to expand margins. Dell beat on earnings, not revenues. That is the theme of this earnings season. Rates will eventually force multiples to contract.

4. APPL can do no wrong. Yes they are great innovators. But the competition that is growing around them is being ignored.

5. An M&A cycle is coming. I believed in this as well. It has not materialized. And now stocks are no longer cheap. Many of the private equity groups I speak with say they are not making new investments. They are still waiting to exit a large backlog of old deals.

6. Banks are in much better shape. I don’t think so. Investment banking is light and the days of incredible proprietary trading profits are behind us. They are still saddled with terrible mortgage portfolios that will only continue to be difficult to unload as the homebuilders like LEN TOL and RYL rush to build while rates are low. Neither will win as demonstrated by the homebuilder’s inability to break through technical resistance.

7. Jobs are coming back. There is a wave of hiring ahead of us. We have actually passed the period where you would have expected to see this. There will be a flood of new people desperate for work and willing to work cheap as we hit may and June and a million seniors graduate college. 100s of thousands of Lawyers will take temp work to survive. And the majority of MBAs still don’t have their jobs lined up. Let alone the amount of high school seniors who will graduate, unable to afford college, desperate for blue-collar work that does not exist. Even worse many will sign their lives away to student loans they will be paying off decades after they graduate.

8. NFLX will dominate the streaming video space. Forget it. Eventually Google, Amazon or Apple will go head to head with them. Studios will jump ship, as they have never been fond of the beating they took during deal terms with Netflix.

9. Oil is going to 100, and this is a sign of an improving economy. What? The last time oil behaved like a rocket we wound up in the worst financial crisis since the great depression.

10. And the #1 reason the market is delusional and will be selling off soon is that I covered the majority of my shorts.

Tynik’s Two Cents

Jeffrey Tynik, on and off the trading desk, always gives his opinion on what is going on. In his daily morning broadcast, Jeff gives insight on the latest technological news in the market. Lots of major action stems from this type of information and can make you lots of money. This morning, Jeff looks for strength in TSM as AAPL touches ties with Samsung. If you want up to date information about technology; make sure you check out this Vlog each morning.


MMI: Just when I Thought it Couldn’t get any Worse

When I first blogged about Motorola Mobility (MMI) a few months back I was very bullish of the prospects as they split the company in half and MOT became MMI and MSI.  That bullish blog proved to be correct as MMI was rock solid rallying form $25 to $36 in a few short weeks.  Then a week or so ago I posted a blog where I became bearish after pricing for the XOOM was posted on Best Buy’s website, $800.  When I first saw the post on engadget.com I almost lost it, how does Motorola plan to compete with Apple with that pricing.

MMI pulled back on the initial reaction but had been behaving fairly well the last few days and it was starting to feel like getting back into the pool was the right trade.  That was until this morning when I got an email from Business Insider that Best Buy is now taking pre-order’s for $1,199, I can only ask who the hell is making decisions at MMI because it is a disaster.

I will be looking to short MMI tomorrow morning as I believe Traders will take this news negatively and there should be more pressure on the stock.

Below is the article from Business Insider:

Motorola is ready to ship what may be the most overpriced product in the history of tech: the Android-based Xoom tablet is available for preorder from Best Buy for $1,199.

This is a fairly high-end version of the tablet with a 32GB hard drive and 3G. The Xoom also the first tablet running Android 3.0, the first version of Google’s OS tailored specifically for tablets.

But $1,200? That’ s not just way more than rumored. That’s not just way more than the comparable iPad, which costs $729.

That’s the same price as the 11-inch MacBook Pro, which is Apple’s top of the line portable computer — a full-fledged notebook computer running a full-fledged operating system and a full complement of apps. It’s more than the Macbook Air, which starts at $999. It’s more than most ultraportable Windows notebooks. That’s nearly FOUR TIMES the price of the cheapest netbook PCs on the market.

It even makes Windows tablets look cheap by comparison.

Motorola must be living on a different planet from the rest of us: earlier this month the company decided to charge $500 for Atrix, which is basically a glorified cellphone dock with a screen.

Trader Rehab Again - I take my book down to zero

Trader Therapy - I got screwed

I was wrong. The market did not pull in and my thesis did not play out as I expected it to. Perhaps the lesson is, a bull can’t morph into a bear. Perhaps the position was too big relative to the risk.  The most difficult rule a trader needs to live by, is never do anything today that jeopardizes your business tomorrow. As such while I have been looking for a pull back in the market for 2 weeks, and was able to maintain a relatively small loss in the face of a strong upward trending market, I could not survive Friday without breaking the aforementioned rule. As I entered the day Friday, it appeared as though all my patience would pay off. I had called right that Mubarak would not back down, and the market was selling off. And then an utter reversal, Mubarak changes his mind less than 24hrs later. This is what I have referred to as a complete exogenous shock. Unfortunately for me, who was quite bearish, this took me by total surprise and to a threshold of pain that I would endure no further. I did what all career traders do under those circumstances; I liquidated all positions and cut down to zero. When you are wrong as a trader and have reached your pain limit, continued misperception that you will be right and further losses are not acceptable, even if the very next day you would have been absolutely correct. While I took a significant trading loss on Friday, my firm remains strong and can begin its battle back to make up for Friday’s trading loss. And while it may take time to make it back as the risk will be paired down significantly, I will find myself in what I refer to as trader rehab. I will step away from the keys for a week or two. When I return, I will trade small as I attempt to regain my confidence.  Hopefully the other traders will rise to the occasion and start our path back toward success. I will focus on the business as a whole. The business on a whole is thriving. Its success far exceeds the trading loss. Trading losses can be recovered relatively quickly. Business success cannot afford to give ground. When you are an entrepreneur like myself, there is an inner force that keeps you moving forward in the face of adversity. You do not look past with regret, you look forward with newfound knowledge. A survivor in this business always rises to the occasion, always suffers setbacks and always rises again. I have suffered through many business and personal losses and celebrated numerous personal, trading and business triumphs. That has been my way for my entire career, my entire life. And probably the balance of what I hope will be a lengthy journey. I would venture to say, you the reader have had similar experiences. What defines us all, is “if and how we move forward”. The best way to see how my journey continues is to tune into hedgefundlive.com