Apple iPad and iPod Sales Crushed Expert Estimates (AAPL)
The market managed to close with mild losses despite a bearish start. Yesterday morning began with a broad push lower that took many indices down by a percent. But by midday most of that loss was gone. And into the afternoon many indices sported gains.
Once again, the market printed a doji. And as mentioned yesterday, the doji is often a prelude to consolidation or, infrequently, a top.
A doji indicates indecision between buyers and sellers. It's the market's way of saying, "There is no reason to be more bullish than yesterday, but there isn't a reason to be bearish either."
Obviously, I favor a move lower in the very near term despite the obvious bullish trend. But given a reason, investors are prepared to take the market higher or lower. And the bulls were handed a reason to race higher today too.
Yesterday, Apple (Nasdaq: AAPL) reported blowout numbers. Apple crushed the analysts' EPS estimate of $10.16 by 36% after management reported $13.87 for the fourth quarter. Apple reported 37 million iPods and 15.5 million iPads were sold. The cash balance of Apple was over $100 billion too.
The bullish news from Apple has the stock up over 7% this morning at an all time high of $450. Most indices looked ready to open higher this morning too, but the positive move tapered off after Japan reported its first trade deficit since 1980 and the UK economy shrank more than expected.
Japan's trade deficit is nothing to worry about because it was driven by a surge in energy imports as a result of the tsunami devastation. And it may take a few more quarters for Japan to operate near normal. But the slowdown in the UK was unexpected. In the fourth quarter the UK economy contracted by 0.2%, which puts the UK one step closer to recession (officially).
The news quickly sank the pound, euro and yen in morning trade. And the 0.5% increase to the dollar now had most commodities (other than natural gas which I believe bottomed Monday) and indices pointed lower to start today's trading. While the decline appears mild, keep in mind the selling pressure erased a 1% gain that many indices sported prior to the UK news.
Today Ben Bernanke will address the public and announce the FOMC rate decision. Bernanke is likely going to keep interest rates at the same level but many believe he will allude to QE3. I'm sure Ben would like nothing more than to announce QE3, but politically it's a tough sell at the moment. I doubt there will be any QE3 language from the Fed this afternoon. And no QE3 from the Fed could translate into no more gains for the indices.
Patience is a hard skill to learn. But when the market is as hesitant as it currently is, patience is critical to your success as a trader. The chart below shows how doji candles were a precursor to a trend change. But it was not an immediate reversal.
