The market continued to make new highs each day this week on the back of another strong round of corporate earnings. Earnings have improved now for nine straight quarters, although it has so far been a jobless economic recovery. The stock market, as of yet, doesn’t seem to mind much, as long as its old friend Ben Bernanke has its back. Wednesday, the chairman uttered more dovish language when discussing outlook for US monetary policy, boosting the market has he has during this entire rally.
During the last 10 minutes of the trading day Friday we saw Nasdaq 100 rebalancing that caused some big moves, most notably in Apple Inc. (AAPL). Apple’s weighting was reduced from 20% to 12%, causing forced selling of the stock. AAPL gave back more than half its gains for the day, closing almost 1% higher. Scott Redler believes this “artificial” weakness in Apple after at the end of the day Friday was a buying opportunity.
Watch the T3Live.com Weekly Recap video below with Scott Redler.
While the market continued to stretch its legs late in the week, tech was more mixed. Amazon.com, Inc. (AMZN) highlighted the strong tech names, exploding 8% higher Wednesday following Tuesday night’s earnings report. With the stock holding up well technically and the company’s growth into the cloud computing sector, AMZN appears poised for higher prices.
Research in Motion, Limited (RIMM) falls on the complete opposite end of the spectrum. The company’s earnings have been gradually deteriorating over the past two years, which some bounces provided by desperate hope for the Playbook Tablet. Last night, that trend continued and the stock got slammed, closing down 14% today. Analysts piled on with massive downgrades, Jeffries going to furthest with a $35 price target (from $80). Still off 52-week lows, RIMM sadly appears to be headed lower after being unable to sustain a bounce today.
Another Redler favorite from the past couple weeks, Caterpillar Inc. (CAT) made new highs today, jumping 2.5% after reporting EPS from the year ago period quintupled (5x). The company reports that the economic recovery boosted demand for its mining and construction equipment.
The inverse head and shoulders pattern we have been highlighting in the S&P appears to be taking shape nice after triggering this week. The measured move would take the index to 1410-1450. Thursday’s close marked a 100% move off March 2009 lows, and while the market and economy have certainly come a long way, both are still faced with major questions. The upcoming end of QE2, with no promise of further quantitative easing amid rising inflation concerns, will be a major test for the market.
*DISCLOSURE: Scott Redler is long AAPL, GLD, LVS, MGM, WYNN, CRM, CIEN, VMW, WFC. Short SLV, SPY, REDF.
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