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MV Weather Report: Sun Rises for Amazon, Not Markets


Rain or shine, we review the day's biggest stock stories.


Amazon (AMZN) was the story of the day as the company reported EPS of $0.45 on revenues of $5.45 bln. This compares to analyst estimates of $0.33 on revenues of $5.03 bln. The company also raised guidance for the fourth quarter and said that the Kindle and Prime were areas of strength for it during the quarter.

For the day Amazon traded higher by 26.80% to $118.49. Today on the Buzz and Banter, Professor Smita Sadana gave her thoughts on Amazon.

"You do know I am a die-hard Amazonian (or Amazonite?!)? As it concerns with Amazon the company.

"There are times when I profess my love for the stock as well. Yesterday, AMZN came out with blow-out numbers and more importantly great outlook. As it trades in an uncharted new-high territory, I suspect most investors are eager to short this. I personally think differently, as I established a long position after hours.

"One can cite the new and improved fundamental reasons and many broker upgrades; I feel that there is an additional reason; the change of technical character. Also, the short interest, while not a lot at 5.68% of float, is doing its part in ignition.

"While I've let go of my 'trading position' in this ramp, I still maintain a core position in it, initiated last night. (Core means different things to different people. To clarify, for me, it means a position that I can hold on to without getting nervous and stopped out on a mild decline. If the stock comes down in an expected manner, I'd add to my core. If the stock continues to go up, well, I have a comfortable position in it)

"The stock is setting the upper boundaries today – levels that might serve as a magnet after the first decline from these levels.

"How can one be cautious about the divergences setting up in the overall market and yet optimistic on this popular stock? Well, it goes back to the tale of two cities – Weakness and Strength!"

In addition to Amazon, Microsoft (MSFT) also reported a strong quarter and the stock reacted by going higher 5.38% to 28.02. Unfortunately, Microsoft's and Amazon's quarters weren't enough to lift the broad market.

For the day, the S&P 500 closed lower by -1.22% to 1079, well off the high of the day of 1095. While the Nasdaq was off by -0.50% to 2154.

Today on the Buzz and Banter, Professor Jeff Cooper gave his thoughts on the market.

"A daily chart of the S&P from my morning report shows that the index bounced from a text book sell set up yesterday morning:

Click to enlarge

"1) Unless the market was going to crash a first hour low is the normal expectation after a late sell off in the prior session.

"2) The S&P bounced precisely from Gap Fill and the level of the prior closing highs at the Autumnal Equinox.

"However, time is getting very compressed which if often times the sign of climatic action: After the Key Reversal sell in September the S&P declined for 7 days while the S&P wouldn't stay down for 1 day after Wednesday's Key Reversal.

"This behavior will embolden the bulls and cause bears to completely capitulate which ultimately leaves a dangerous market in my opinion.

"Was the set up from Gap Fill and the prior highs simply textbook technicals or too pat?"

That's all for this week. Have a great weekend!

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No positions in stocks mentioned.

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