STTG Market Recap Oct 24, 2012

Both the NASDAQ and S&P 500 finished down 0.3% Wednesday as oversold conditions were not enough to elicit a bounce.  There was a gap up to start the day as Chinese ‘flash’ (initial) purchasing managers data came in better than expected but that lasted all of a few hours.  The equivalent data out of Europe continued to be awful.  As we have seen for much of the past month the buyers come in the morning and the sellers dominate the last hour.  The Federal Reserve announced the results of their two day meeting and as expected there was nothing new after the shock and awe of the past meeting.

Let’s take a look at longer term charts of the indexes to put them in perspective.  The S&P 500 has had two long ascending channels both early in the year than beginning in June.  In between those two was a quite serious setback of roughly 10% and it appears the index might be at the beginning of a new correction, of unknown magnitude.  Notice the last one did not roll over right away but broke out of the channel, went sideways for a few weeks – even spiking upward in late April to offer a huge headfake –  before a much larger selloff in May.  Of course there need not be a repeat of the same pattern but certainly it is not a period to have guns blazing even though we can certainly expect some sharp rallies in the coming weeks here and there when conditions get very oversold.

The NASDAQ has been much weaker in the back half of the year after a sterling start to 2012.  Not only is is below April’s highs, it is even below the highs of early summer.  It sits right above the 200 day moving average and thus far has seen little bounce.  Apple reports tomorrow and the fate of this index will be in that company’s hands for the very short term.

The star of the day was Facebook (FB) which posted decent earnings and forced a big short (selling) covering rally.   The worry with this company – and to a degree Google (GOOG) – is their strategies for mobile as there is far less opportunity (screen space) to advertise versus on a PC or a tablet.

  • Facebook said it earned 12 cents a share minus items, on sales of  $1.26 billion. Analysts polled by Thomson Reuters were expecting the social  networking giant to earn 11 cents a share on sales of $1.22 billion.  The company said 14% of its $1.09 billion in ad sales  in Q3 were from mobile.  Total ad revenue rose 36% in the September quarter from a year earlier. In the  June quarter, Facebook reported ad sales growth of 28%.

Tomorrow expect nothing but Apple (AAPL) talk in the financial media as the company’s earning report is the most anticipated piece of data in the quarterly earnings season.  Friday’s market will most likely be dominated by whatever Apple offers – good or bad.

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