Time to ‘Sell the News’ After Apple Earnings?

by Ryan Mallory | January 19, 2011 9:23 am

Current Long Positions (stop-losses in parentheses): None

Current Short Positions (stop-losses in parentheses): GLD (136.40)

BIAS: 7% Short

Economic Reports Due Out (Times are EST): MBA Purchase Applications (7 a.m.), ICSC-Goldman Store Sales (7:45 a.m.), Housing Starts (8:30 a.m.)

My Observations and What to Expect:

• Futures are mixed heading into the open.
• Asian markets showed a respectable amount of strength in trading, while Europe is trading just below break-even.
• Apple (NASDAQ: AAPL[1]) earnings were announced yesterday after the close, and were well received by the market. Now investors must decide whether they rally on those earnings, or if it is a “sell-the-news” event.
• IBM (NYSE: IBM[2]) also reported solid earnings and is trading a few percentage points above its closing price.
• Ideally, one would think that a good earnings report from AAPL and IBM would be enough to rally the markets, particularly the NASDAQ, but instead, the market is acting very indifferent to the news, which could be a precursor to a good earnings season already being priced in.
• The S&P 500 continues to trade up against the upper channel line in the short term. If it holds, there is little opportunity for price appreciation.
• S&P also continues to trade outside of the upper Bollinger Band, which is difficult for any major market index to sustain.
• For 33 straight days the S&P has closed above the 10-day moving average, one of the more impressive streaks in market history.
• Volume has been much higher in recent days.
• Market breadth continues to trend in a negative manner despite the market trending higher.
• Other divergences are showing up, for example the RSI indicator that continues to trend lower and making a series of lower-highs and lower-lows, despite the positive trend in the market.
• With that said the market can continue to trend positively much longer and further than one would expect, and can stay irrational for far longer than one can stay solvent betting against the market.
• A strong move out of the upper price band could see the S&P push higher up to 1310. But for now 1300 is on the minds of all traders.
• But expect some resistance at 1300 – a lot of talk about the market reaching that milestone, and now that it has, we could see a flood of profit takers hit the wires.
• 1261 represents the short-term ‘higher-low’.
• The more long-term trend-line dating back to Sept. 1 currently has support at 1250.
• For the bears – Push the market below the prior days’ lows, and avoid the late day buying rally that continues to occur.
• For the bulls – Break 1300, and close above it.

Here Are The Actions I Will Be Taking:

• Will consider day-trading the breakout setups that look the most appealing to me.
• Willing to jump back in to the long side, should the market show strength, particularly with how it responds to a test of 1300 on the S&P.
• Will look into day-trading some earnings plays.
• Initiating one to two new short positions is not out of the question.
• Follow me in the SharePlanner Chat-Room[3] today for all my live trades and ideas.

The SharePlanner Swing-Trading System is a proven trading strategy that has outpaced all the major indices with an 8-year return of over 1,010%. It’s an easy trading system that requires very little effort after you buy the stock and great for those who can’t watch the market all the time! Find out more by visiting SharePlanner.com[4].

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