Snapshot Notes - April 23, 2008


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WEDNESDAY, APRIL 23, 2008

Apple Should Set Early Tone Tomorrow

04/23/08 3:30 PM EST

As of:

SPX 1375

HELP ARCHIVE

With all the attention traders are paying to tonight's earnings report from Apple, I thought it would be appropriate to highlight the market's past immediate reactions to that stock's reports, especially since I can't find much else notable enough to seemingly provide us with a solid edge.

The table below shows the performance in the tracking funds for the S&P 500 (SPY) and Nasdaq 100 (QQQQ) after prior Apple releases. There are three columns for SPY and QQQQ each, which look at the percentage change from the close to the next day's open, from the next day's open to that day's close, and then from the close of the Apple report date to the close three trading days later.

From the table, we see that the S&P gapped up the next morning more often than the Nasdaq 100, especially over the past couple of years. Both indices tended to back off the next day, when looking from the open to the close.

That tendency was especially acute in the Nasdaq, which showed a positive open-to-close the next day only 36% of the time, only once out of the last eight quarters, and none out of the last five.

If the Nasdaq 100 was up more than 1% the day that Apple releases its earnings, then it gapped up the next morning 6 out of 8 times by an average of +0.1%, and closed higher than the open 5 out of the 8 times by an average of +0.8%. The two times that the NDX gapped down, it went on to lose more during the day both times (-0.5% and -1.5%). If it gapped up, then it went on to gain more during the day 5 of 6 times by an average of +1.5%.

It's easy to read too much into any one event, and Apple's earnings tonight is no different - the world does not revolve around the iPod. But if there's any general tendency that we've seen over the years, it's that the Nasdaq 100 tends to sell off from open to close during the day following Apple's earnings, however that tendency may be dampened a bit by today's gains in the NDX. If the index gaps down tomorrow, then that would seem to bode less well for the index.

Again, this is nothing but a general tendency and I don't have any intention of trading off of it, particularly as I don't see any other solid edges at the moment. As I mentioned yesterday afternoon, the market had already pretty much worn out the negative biases we'd been discussing over the past couple of days, and we're not left with much after that. If we were overbought at the moment, and the NDX gapped down tomorrow, then I would be more inclined to press the short side given the tendencies mentioned above, but we're not. I'm still flat here for trading accounts and don't see anything among the index or sector funds that looks particularly appealing here.

Short-term Edge Fades Away

04/23/08 10:20 AM EST

As of:

SPX 1375

HELP ARCHIVE

Good Wednesday morning...We begin the day with mixed performance in the major indices and the broader market sectors. Technology and some select Financials are leading, while the "evil twins" of Gold and Oil drag along at the bottom. That's typically a good combination for the broader market if it holds up.

When we got the big lift-off from Google on Friday, by mid-morning that day we were witnessing several of the usual signs of a trend day, where downside reversals going into the afternoon become very rare. Stocks did hold up going into the close, but there were still several nagging negatives that had triggered heading into this week.

On Monday, stocks continued to hold up, but we went over a few additional negatives that had cropped up. Between post-option-expiration seasonality, excessively low volume, the price pattern heading into Monday's close and the fact that much of Monday's gains were levitating on the back of expectations of Apple's upcoming earnings report, we had a number of negative factors lining up for Tuesday's trading.

The problem with those negative biases was that they all had such a short effective time frame. Basically nothing we went over showed any edge going beyond one to three days, and while Tuesday followed through on the negative expectations, it also pretty much wiped away that edge.

I haven't been able to find much of anything worthy of note through this morning, as all the sentiment-, breadth, and price-based studies I've been working on haven't led to any consistent performance going forward. Perhaps that's just as well with earnings from Apple and Microsoft coming up, both of which have the power to move the entire market despite what any secondary indicator may say.

I'm flat for trading accounts at this point and holding only slight long positions longer-term, and I don't see much here that has me itching to change either.

All the best,

Jason Goepfert

President and CEO

Sundial Capital Research, Inc.

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