Buzz on the Street: Apple Back on Top
A look back at the happenings on Wall Street this week, as seen through the Buzz & Banter.
All day and every day, some of the stock market's best and brightest traders and money managers share their ideas, insights and analysis in real-time on Minyanville's Buzz & Banter. Below are some excerpts from this week's Buzz. Click here for a 14 day free trial.
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Monday January 23, 2012
News that Starbucks (SBUX) is planning on expanding its roll out of serving wine and beer at U.S. locations is the wrong recipe and strikes me as evidence that the company is once again straying from its core competency in search for growth. While the initial plans for turning it's coffee shops into wine bars is said to be limited to less than 30 of its 10,000 current locations it is reminiscent of its foray a few years ago of introducing wide variety of food which fell flat and ultimately resulted in a retrenchment and closing of down of many locations. It is a bad mindset.
I understand SBUX belief that it is a "third space" and offering alcohol might extend the after work business but I just don't see the urban customers it's targeting as choosing it over an actual brew pub to enjoy some craft beer. And it will create friction between existing customers that are looking to sip caffeine and WiFi out their extra hours.
While I'm not sure if today's sell-off in SBUX shares are due to this news, it shouldn't be in the near term as the numbers aren't enough to move the needle, it could be taken as a warning that the company is once again trying to be too many things to too many people. It should focus its growth on Asian expansion, not trying to compete for the happy hour or Merlot loving crowd.
I'm looking at pairing up a long such as Tim Horton's (THI), which really has room to grow in the U.S. and beyond, with shorting SBUX. I'll work up a plan tonight in my local Dunkin Donuts.
Dancing With Bernie and the Jets
With this week being a 2 day Fed meeting, the normal expectation for this years stair step march to get upended runs ripe.
With this morning's nominal overthrow of the rising wedge in the S&P shown in this morning's Daily market Report and the turn into the red, the stage is set for a reversion to the mean of this year's recent dampened volatility and a gonzo of an FOMC Cha Cha Cha.
(click to enlarge)
Euro Target Causing Resistance
After bottoming at the decline's 1.2650 target, the Euro's recovery above 1.2750 put into play a bounce targeting 1.3050.
1.3050's test this morning is clearly causing resistance. Is that the bounce's peak prior to resuming the decline? Possibly.
But a pullback has room down to 1.2950 before the bounce loses its traction. And with or without a pullback, the bounce still has potential for extending higher to test 1.3333 and 1.3400.
I'll have more in today's Daily Commodity Spot article towards the close.
Short Treasuries by Shorting the Yen
Michael A. Gayed
I've written about this idea before, but it bares repeating. When markets are in risk-off mode, Treasuries and the Yen both tend to do well as money seeks safety from volatility and equity markets. The two tend to be highly correlated, meaning that one way of betting against Treasuries if you're a currency trader is to short the Japanese Yen. Having said all that, ask yourself who wants lower prices more: the Bank of Japan on the Yen, or the Fed in the Treasury market? Japan needs to export and a weaker Yen would help with that. The Fed wants to put a lid on interest rates and a floor in bond prices.
So if you want to short Treasuries, consider shorting the Yen instead.
Tuesday January 24, 2012
The Calm Before the Storm?
We've got the lowest trading volume since 1999, the VXO is trading in the teens (despite the binary global situation), Apple (AAPL) will report earnings tonight and the FOMC -- chock full of whispers of QE3 -- is slated for tomorrow.
Where oh where is the action, my friends?
One of two dynamics are in play and they have opposite implications (naturally). This is either the calm before the downside storm -- the denial before the migration and panic -- following a month-long ramp that has everyone bulled up, or equities are working off the overbought condition through time rather than price.
As discussed yesterday in real-time here on the Buzz , I layered into NDX puts to position myself for some downside action in tech, but the tape has held tight, albeit a smidgen lower. One would have thought that the specter of a Greek default, which up-ticked on our probability spectrum overnight, would be enough to dent the momentum but it didn't matter and the reaction to news is always more important than the news itself.
Do I think that we've got a rude awakening ahead? Yep -- even if global austerity measures are successfully implemented, it will be a serious drag on growth (and that's the best case scenario). Do I believe that starts tomorrow? If I knew the way, I would take you home. As I don't, I'm left with a decision to make.
The last time I left the office--over the holidays for a family vacation -- I zagged against my discipline and left risk on the books. I was rewarded -- Research in Motion (RIMM) enjoyed a successful sprint -- but it wasn't the smartest move I ever made. I got lucky, and the two should never be confused.
This time around, as I ready for a business trip to Panama that will last through the weekend, I've got the aforementioned chunk of NDX puts, and while I sense a gut-check coming, I've been doing this long enough to understand that discipline must always trump conviction, even if you stumble on previous attempts.
As such, in the interest of full disclosure, I'm gonna peel out of those puppies as we edge toward the close and hit this trip with a flat book and a clear head. Sometimes the ability not to trade is as important as trading ability, and while the gambler in me entertained the idea of leaving partial exposure on my sheets, the pragmatist just wont let it happen.
In other news, Wall Street lost another of its own today when Ticonderoga Securities announced that it will shutter the doors (joining WJB Securities, which made a similar announcement a few weeks ago). There is no way to sugarcoat how difficult it is out there (white light to those families) but there is a silver lining on that cloud -- in order to get through this, we have to go through it, and we're going through it now.
As discussed in 2006:
Traditional brokers will need to highlight their human capital and provide a platform that marries low cost trading solutions with real-time information flow. The current "one and done" morning call won't cut it, not in the world of instant messages and real-time decision making.
Therein lies the task at hand for financial professionals around the world-the sell-side, once a conduit of execution, must reassert themselves and demonstrate relative and compliant value if they're to stay in the mix. There will always be a Wall Street and a need for capital markets. The trick, for an industry mired in overcapacity, is to proactively adapt before the trade passes them by.
If you're on the sell side, be thankful for demonstrating the capacity and resolve needed to chew through these enormously difficult times. There will be winners in the new world and the fact that you're reading this means you're in the running to be one of them. Indeed, one man gathers what another man spills.
As always, I hope this finds you well.
Actionable Trade in X
As witnessed by the chart below, US Steel (X) has built itself a nice little wedge pattern here. I am long the stock and will look to add additional share size if it can get through $29 with volume.
(click to enlarge)
DinDin Part II?
This morning Dendreon (DNDN) dipped, turned on a dime, and now is $0.40 away from $14.66, the break out level of its consolidation area. Doesn't mean that it will bust out, but technical break-outs on highly shorted, low-priced stocks can be a combustible recipe. Something to watch for on a sleepy day.
Apple Sees Your Estimate and Raises It by $4
Apple (AAPL) just reported its fiscal first-quarter numbers and they're quite shocking, to say the least.
I wrote this morning that Apple needed to put up monster numbers to get the stock moving again, and all I have to say is "Mission Accomplished."
Earnings came in at $13.87 per share, nearly $4 above consensus. Revenues were equally impressive at $46 billion, versus a $39 billion consensus. Gross margins were a shocking 44.7%, which is well above what anyone thought was possible.
iPhone sales were 37.4 million, which absolutely crushed street estimates hovering around the 30-million unit mark. iPad sales of 14 million were also above expectations. Mac sales were 5.2 million, growing 26% year-over-year.
Second-quarter guidance is $8.50 per share versus Wall Street's $8.00 forecast. Revenues are seen coming in at $32.5 billion, which is just slightly above consensus.
Apple is halted as I'm writing this, but shares of Apple suppliers and related companies, including the likes of Qualcomm (QCOM), Broadcom (BRCM), and Nuance Communications (NUAN) are popping on the news. Nasdaq (^IXIC) and S&P (^GSPC) Futures are also up significantly after hours,no surprising given Apple's huge weighting in each.
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