The World’s Biggest Company Does it Again

The market had some trouble again on Tuesday. Although the declines were sparse and most indices managed to print modest gains. Also, volume was solid as SPX banged 1374 resistance. That is an important development.
The increase in volume suggests that sellers wanted to protect that level. Sellers have been active this week, but they were unable to break below 1355. The defense by the bulls was nice, but the bears appeared ready to defend 1374.
It would be an important development for the buyers to take back the 1374 zone because the bears’ backs would then be on the rope. After the failure, the bears will likely be forced to cover their positions and that should get SPX back near 1401 – from there we could be looking at the makings of another big rally.
The bears have one thing going for them today, that’s a U.K. recession. With the release of a 0.2% decline in GDP today, the country officially entered a recession.
But earnings news has been far more bullish. Both Boeing (NYSE: BA) and Caterpillar (NYSE: CAT) crushed estimates today. That should get the Industrials moving.
The biggest catalyst for the rally is obvious. Apple (Nasdaq: AAPL) crushed earnings estimates again. At the very least this blow-out quarterly report will get the lagging Nasdaq back and running, but the other indices should want to keep pace with technology stocks.
It will also result in numerous analyst upgrades. Topeka Capital was the first; they raised their AAPL target to $1,111 from $1,000.01 – this was probably a PR move in some respect. But other investment houses are likely to follow suit this week because AAPL destroyed previous guidance estimates.
Apple did yesterday what Apple does best – crush analyst estimates. EPS rolled in at $12.30 versus $10.06 expectations. Revenue popped to $39 billion versus $36.8 billion expected. iPhone sales led the charge with 35.1 million units sold, outpacing the expectations by 17%.
Besides the great news from the iPhone king, banks recovered yesterday. Silently, bank stocks led the charge higher and gapped 1% to the upside. For the better part of seven months I ranted how important banks stocks would be to the rally. When a leadership groups shines on a lazy day, it’s a good sign of bullish things to come.