STTG Market Recap Oct 8, 2012

Stocks were broadly lower Monday as Apple (AAPL) continues to drag on the NASDAQ; the stock is now down 9.5% from its peak of $705 just over two weeks ago.  While we want to refrain from harping on this one stock as so many other media outlets do, its effect on the NASDAQ is not to be understated since it’s massively overweighed there.   One could see that in the indexes today as the S&P 500 was down 0.35% but the NASDAQ 0.76%.

We mentioned Friday that if Apple fell below the current range (top two purple lines) it could potentially end all the way back up to where its break out began.  It made half that move today alone.  Some reports that a a Foxconn plant in China that makes Apple’s iPhone was crippled by a strike helped pressure the stock today.

 

The action in Apple continues to pose issues for the broader NASDAQ index which cannot shake this “head and shoulders” pattern as outlined in the orange ovals.  Certainly when Apple becomes oversold – as it is close to reaching- it will experience a dead cat bounce of sorts but if that does not have staying power it bodes ill for the NASDAQ in the coming weeks.  Keep an eye on the 3100 level and below that 3080 (the lows of two weeks ago) if this selloff continues.

The S&P 500 continues to look far more benign as it has a broader array of exposure in its top holdings.

 

The ever volatile Netflix (NFLX) was the big winner of the day after Morgan Stanley raised its rating to “overweight” on the stock , saying that Netflix could  become a global video platform.  This probably caught a lot of short sellers wrong footed.

There was little in the way of economic news today and in fact this week is very light overall in that regard.  The Federal Reserve beige book Wednesday and a pair of reports Friday (consumer confidence and producer price index) are really all that the market will really be paying attention to.  Instead the focus will begin to rotate to earnings which kick off later this week.  For more on that read Blain’s piece “Five Easy to Navigate Earning’s Season Better than the Pros”.  We’ll highlight the key third quarter reports in the weeks ahead but companies have already been busy lowering the bar (so that in the weeks ahead they can boast they “beat analysts expectations”!)

  • 91 companies in the S&P 500 have issued negative outlooks versus 21 positive pre-announcements, for a ratio of 4.3, the weakest showing since the third quarter of 2001.

Have you heard about the price of gas in California? Not so fun.

  • The average price of a gallon of regular gas in California hit $4.67 a gallon on Monday, according to AAA. It stood at $4.17 on Oct. 1 but has risen every day since then. The worst was a 17-cent spike on Friday, followed the next day by a 13-cent increase.

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