D&D Note (4-16-2012)
Spain continued to rain percentage points on their sovereign debt where the bond yields rose above 6% which is the highest level we’ve seen in quite a few months.
Despite all the pain in Spain the DOW surged 71.82 points thanks to the banks. However, the Nasdaq was under huge pressure with Apple (AAPL) being down (Apple makes up 19% weight to the index) and the index ended the day down 22.93 points. The S&P ended down 0.69 points and was also under pressure due to Apple.
But why has Apple been falling the last 5 days and fell as much as it did today? DOJ e-book pricing manipulation case? Profit taking? No and No… both are not big enough catalyst to see the stock fall 9% over 5 days into what would technically be called a correction move in the stock.
The real reason we’ve seen Apple get sliced? The largest company in the world (yes that would be Apple) reports earnings April 25th. On average over the past six years the stock rose 3.67% the day after the Q2 report. So why is the stock down? Shouldn’t investors be buying the stock ahead of earnings?
Well – why buy a good stock at a high price – when you can knock it down and buy it cheaper creating even larger percentage upward gain. You are probably asking yourself how the hell can you do that? Unfortunately retail investors don’t have the ability, but large hedge funds do.
What’s going on is the hedge funds are heavily shorting the Apple stock to artificially bring the price down ahead of earnings. The key level is $570 which is the 50 day moving average, they would like to see the price drop as close to the 50 day as possible.
Over the past few trading days D&D has been adding to the Apple position as the stock falls.
Bank earnings continued to come in good with Citigroup (C ) beating on earnings today following beats by Wells Fargo (WFC) and JPMorgan (JPM). More heavy weight banks report this week with Bank of America (BAC), Goldman Sachs (GS), and Morgan Stanley (MS) all reporting later this week.
Google got slapped with a whomping $25k fine for “willfully” stonewalling the FCC over the Street View probe into whether Google was accidentally grabbing personal info off of Wi-Fi routers. Yeah thats a whole $25,000 – Sergey might have to sell one of cars to cover that fine.
Gold is still bouncing around trying to find the fib retracement level and was down $6.30 to $1,652.60 an ounce.
American sovereign debt on the 10-year still remains under the inflation rate of 2%.
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