October 20, 2019

Daily Wrap

DJIA +67.12 (+0.49%) to 13,779.33; S&P 500 +2.25 (+0.15%) to 1,494.81; NASDAQ +10.49 (+0.33%) to 3,153.67

All in all today was a nothing as we started around flat and stayed flat the majority of the day until we (again) rallied into the close after lunch.  After the close we had Apple Computers (AAPL) report earnings which slightly beat EPS estimates but slightly missed on revenues.  The futures dropped at the same time as AAPL reported and started to decline and now stand down about 7 points as I write.

Apple (AAPL) clearly is driving discussion after the close and it is undeniable that it is one of the more tracked and polarizing stocks out there but I will look to the open tomorrow to review AAPL and instead tonight will focus on other names making news.  Just because it is a big name I will recap the earnings numbers for anyone that missed them.  Q1 EPS $13.81 vs consensus $13.44 on revenues of $54.5B vs consensus $54.73B.  AAPL reported Q2 revenue estimates of $41-43B vs consensus of $45.6B and AAPL does not provide EPS guidance.  The headline comments noted new stores including 4 in China and then I saw a lot of couldn’t keep up with demand talk.  I have yet to see analysts weigh in but many did make edits prior to the report and I assume there will be more comments by tomorrow.

We did get earnings beats from two big companies yesterday after the close and they were in focus today.  The first is International Business Machines Corp. (IBM) which reported Q4 EPS of $5.39 vs consensus of %5.25 on revenues of $29.3B vs consensus of $29.09B.  I wouldn’t necessarily say that IBM is undervalued here especially after today’s 4.41% move but I think IBM is name that has o go on the watch list going forward to see if it can flag or provide another trade-able pattern.

The other big name that beat earnings was Google (GOOG).  This is a name that was already on the Watch List and was also already a past trade idea but it has earned the right to stay and even a spot toward the top.  The other interesting this is that after IM’s report I didn’t seem many analyst comments like price target raises or upgrades etc but that wasn’t the case with GOOG.  There were multiple price target raises and I would say the range went from $830 to $900.  I personally want to see GOOG trade another few days to see it digest the earnings and try and get a beat on the action before trying to carve out how I want to play the name.  Hopefully by then a clear pattern will emerge with a good risk/reward profile.

Other notable movers on earnings today were Cree (CREE) which closed up 22.05% to $40.85 and Coach (COH) which closed down 16.63% to $50.75.

Last piece of new for tonight is MAP Pharmaceiticals (MAPP) which announced yesterday after the close that they agreed to be acquired by Allergan (AGN) for $25 per share.  This represented an over 50% premium to the previous day’s close.

As always you can visit the Event’s Calendar for the release of economic data, scheduled meetings and other news that could move the market.

According to Briefing.com, the following noteworthy companies are scheduled to report earnings before tomorrow’s open: ABC, ACAT, ALK, AME, AOS, ARG, AVT, AVX, BAX, BC, BGG, BMY, BPOP, CCMP, CELG, CLP, CSH, CY, DLX, DOV, EQT, ESI, FCS, GMT, GWW, HUB.B, ISCA, JNS, KCG, KEY, KMT, LMT, LUV, LYTS, MDP, MKC, MMM, NMM, NOK, NPBC, ORI, OSIS, PCP, PROV, QSII, RTN, RYN, SASR, STEL, STL, SWK, TAYC, TDY, TZOO, UAL, UCBI, UNP, XRX

The S&P 500 futures were down after AAPL reported and it will be interesting to see if this will spark a decline even if it is only small.  I have been noting that the 60 min MACD on the SPY has been lagging and overall I felt that a small decline/consolidation would be healthy before the market pressed higher.  Since then we really never had what I would consider a consolidation even after pressing to new 5 year highs.  This could be the catalyst that makes the market pause and reset.  Otherwise my opinion remains that the market is still in an uptrend but I would be decreasing position sizes on new trades to reduce overall risk.

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