Minyanville's T3 Weekly Recap: Markets Recover From Pre-Market Losses, End Flat to Close Bearish Week

By T3Live.com  OCT 26, 2012 4:55 PM

Tech heavyweights Apple and Amazon reported disappointing earnings.


US markets finished basically flat Friday, with the S&P (INDEXSP:.INX) slumped to a marginal decline while the Dow (INDEXDJX:.DJI) and Nasdaq (INDEXNASDAQ:.IXIC) finished narrowly positive. For the week, stocks finished with losses of around 1%, feeling decidedly heavy and unable to hold gap ups and rallies.

Earnings season, which already had low expectations coming in, has been even worse than expected with many notable stocks falling short of consensus estimates. Last week Google (NASDAQ:GOOG), IBM (NYSE:IBM) and Intel (NASDAQ:INTC) were a few of the most notable misses that led to sharp declines. The Nasdaq has shown relative weakness over the last few weeks, and now we are perhaps seeing why following a slew of disappointing reports.

Last night, two other tech heavyweights, Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN), reported what looked like very disappointing earnings. After those two reports, each stock initially traded lower and futures traded lower after hours. Although both AMZN and AAPL recovered those initial post-report losses, futures still indicated a sharply lower open early this morning. However, a decent GDP reading of 2.0% growth in the third quarter helped ease those pre-market losses.

AMZN completed a stirring comeback from last night's lows to finish up 6.87% for the day, while AAPL still finished 0.91% lower.

Traders are still in wait and see mode, but today, after the market absorbed earnings from AAPL and AMZN, trying some tactical longs made sense. However, in order to initiate more swing type positions, we like to see more extreme oversold readings and more significant support levels reached.

Next week should provide more volatility and opportunity, perhaps a very compelling opportunity to buy this dip. But, as always, we will let the price action do the talking. A wild card is Hurricane Sandy, which threatens to make a direct hit on New York City and potentially close portions of lower Manhattan, in addition to wreaking financial havoc on the entire Northeast.

Scott Redler is long AAPL 635 calls, short AAPL 645 calls (call spread)