Thursday Freak Out – Apple (AAPL) Profit Warning Wrecks the Recovery

Only $84Bn?

That's right folks, Apple (AAPL) issued a rare warning last night as CEO, Tim Cook said trade wars (including a Chinese boycott of Apple) have hurt even the World's Greatest Company and they would "only" sell $84Bn in their Q1 (normal people's Q4) which is $9Bn (10%) less than the high end of guidance.  AAPL also guided gross margin lower, to 38% so we can now whip out our iPad Calculator and say $84Bn x 0.38 = $31.92Bn in gross profit which is – GASP!!! – almost $2Bn less than they earned last year in Q1.  OMG – SELLSELLSELL!!!!

That was sarcasm, of course – we're buying.  $84Bn is $4Bn less sales (5%) than last year and $2Bn less profit is 6% lower and of course we don't like to see our companies taking steps backwards but this is another one of those self-inflicted wounds Trump is causing to our economy and Apple is the biggest company in our economy – so of course they are going to feel some pain. 

We already took a long position on the Nasdaq Futures (/NQ) at 6,200 in our Live Member Chat Room as I put out a note at 4:55 am.  Clearly the sell-off is an over-reaction that has no basis in reality, but that won't stop AAPL from going lower as idiot analysts jump on the bandwagon and downgrade it – we will just have to be patient.  The Nasdaq drifted along around 6,200 until just about 7am, when it blasted higher, to 6,250 for a quick $1,000 per contract gain – a nice way to start our day!  

I'm not going to make a case for AAPL as it's boring, I was bored back in May when AAPL droped from $181 to $158 on "disappointing" earnings – which did a good job of flushing out the retail suckers before they blasted to $232 on the July earnings report.  You really can fool some of the people all of the time and all of the people some of the time – especially when they are Apple traders!  Of course when hedge funds need a boost, they like to load up on big stocks like AAPL but how do they get them to be cheaper?  We…
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What Now Wednesday – Bad China Data Gets 2019 off to a Bad Start

2,480.

That's the weak bounce line we've been talking about on the S&P all quarter and that's the line we're playing with this morning as the markets digest China's Caixin Manufacturing Index, which fell to a declining 49.7 in December, the first time China has shown contraction since May of 2017.  

Still, the theme follows through from last quarter that we are all suffering from self-inflicted wounds as the ongoing trade war has sent New Export Orders plunging to their lowest levels since Q4 of 2011, when we didn't have a trade war and things turned around sharply from there so it's hard to say what happens next – but it is certain this negativity can all be unwound very quickly, IF our President pursues a rational course of action (see, now you are worried again!).  

That is a theme I notice when pundits are discussing US policy these days – noithing is off the table – we are an insane super-power that could nuke North Korea or strike a trade deal with North Korea or annex North Korea or Sanction North Korea or push North and South Korea together – it's all on the table because no one knows what the F our foreign policy is – even from minute to minute.  

Image result for trump insane cartoonThat kind of madness internally means the markets can be moved on any sort of insane rumor because ANYTHING is possible.  "Trump Declares War on Apple" is not a headline you would ignore because it MIGHT be true and, unfortunately, modern trading algorithms are trained to respond to headline news – on the assumption that thing that make the headlines of mainstream media are likely to be true.  This is no longer the case as the MSM also doesn't know if something is too insane for Donald Trump or not.

 

IN PROGRESS