How many sessions can you have in one day? We have a fabulous rally. We have a hideous nosedive. We have a miraculous ramp up which takes us higher.
It's three, count em, three, three sessions in one.
Let me give it to you even better. I am writing about the market all day and I first put a piece together that says don't chase this rally. You've got bad news in three key groups: a miserable but mellifluous report from United Airlines (UA) , a convoluted and sad set of numbers from General Electric (GE) and a devastating series of research reports of what, collectively amounts to a coming collapse of Apple (AAPL) iPhone X sales as well as a damning story about the quarter from Texas Instruments (TXN) , a company that never misses.
Then the market takes a total header in reaction to the airline, industrial and tech corrections, and when the Dow had fallen almost 272 points from its high, I dashed off a piece saying that people have instantly gotten too negative and while you may not want to buy the stocks directly in the blast zone, there's plenty of good stuff to buy.
Before the proverbial cyber ink can even dry what happens? We shoot up 140 points and we are back again where I am worried about the market coming in too hot too fast.
And it is then I realize it is time to adopt a new view of this market. We have a 9:30 to 11:00 session. Then another that goes from say, 11:00 until 2: 00. And then we have a third that goes right into the close.
That way we can make sense of the darned beast and its three feeding sessions.
What the heck did happen today. First, as I always tell you, it's earnings season and in earnings season here's the deal: people like to read the headlines and take action even as I think many of these headlines are written by bots. I am often surprised that the president doesn't address the negative headlines written by bots and call them out as fake news because they really are exactly that.
Any news that doesn't take into account the full story is fake news. Of course you could take your cue from the three sessions analysis I just offered and write a true headline that says "hey, this seems like bad news so far but stay tuned," kind of like a headline that would be something written about the first part of say, "Taken," or maybe "Shawshank."
Of course, I am not being facetious, which is a twist on the usual "of course I am being facetious."
That's because I want to tackle some of the precipitous causes of today's session-two decline, as opposed to the first and third.
Tech started down because of the prevailing theory that the uses of semiconductors are slowing because Texas Instruments reported a bad quarter.
First, having had the misfortune of doing all the homework, can I just say that this was NOT a bad quarter from Texas Instruments, which makes chips for the internet of things, the industrial economy. It was an excellent quarter. Did the management pound its chest and tell you how amazing it is doing? No.
That's not their style.
Did the stock go down because it wasn't doing well.
No, the stock went down because this once volatile equity started the year at $105 and then shot up to $120 in relentless fashion.
It had the misfortune of simply rallying endlessly and then reporting a quarter that verified the rally but not more than that and somehow, perhaps by mistake, Dave Paul, the head of investor relations said that business of Personal Electronics was a "mixed bag."
When I heard the phrase Mixed Bad with a stock that has just rallied fifteen straight points I knew that was all she wrote. I prayed for a do-over that they could take it back. Upon further review. Anything. But the cat was out of the bag or the horse had left the barn or whatever animal metaphor you want and that was the end. Almost every single semiconductor and semiconductor capital equipment company's stock fell apart. It was hideous. And it didn't end. Memo to Texas Instruments, next time when you have a bat out of hell good number do not refer to any particular line item as a "mixed bag" especially because it really wasn't.
How about this Apple situation. First I want to make something clear, the same thing I made clear to club members of actionalertsplus.com in a video today: Apple's stock can go down. This is not like the old play of Camelot where Robert Goulet crooned:
A law was made a distant moon ago here.
July and August cannot be too hot.
And there's a legal limit to the snow here
There is no legal limit to Apple's stock falling and it is okay that it's not too hot in January or February for that matter.
Apple's crime? It's the dreaded surveys again. This time multiple surveys that show a steep drop in orders by Apple for parts for iPhone Xs. How steep? Perhaps as much as 50%. The reports made it seem like you could buy a X and get another for free.
Now I absolutely have no idea how sales are going at this very moment for either parts or the X itself. It's entirely possible that sales aren't that great. It is also totally legitimate that analysts downgrade the stock or suggest you trim your positions. I am never going to step in front of someone who wants to take a profit and pretty much everyone in the world has a profit in this stock.
However in what may be the lonely defense in Apple's favor can I say that even if sales are weaker, the company has a good service revenue stream and there are individual moments of weakness here not unlike the ones that drove the stock down to $93 from the $130s before the move to the $170s. Here's my advice. If you can't live with some short-term pain in Apple as analyst after analyst takes a bite out of the darned thing, then kaching kaching. NO harm no foul. My problem is, how can I tell you to sell here at $177 and then, what, get you back at $168, or at $159 because the phone sales have picked up. Maybe you are that good. I am not. I accept though, that the stock, for now is headed down and I can't pass a law that says otherwise.
Airlines are different. The airline stocks do well when there is discipline to pricing and to additions of aircraft. Ever notice that every time you travel it is an extremely full flight and you can't even put your bag near you anymore? That's because the airlines aren't in vicious fare wars all over the place.
Today United was like when a couple of kids get together and say "one two three four I declare a thumb war." Yep, if United declares war, which it definitively did by deciding to add capacity not for one year or two but pretty much as far as can meet the eye, you got a visceral and negative reaction from the stocks of two, American (AAL) , three, Southwest (LUV) and four Delta (DAL) . Until there is a truce, unlikely given that today is day one of the war, I expect these stocks to be under pressure.
Finally there is General Electric (GE) . Candidly I thought the quarter as not horrendous, with some green shoots in health care and oil and gas and a red-hot market for aerospace, not quelled but stoked by what United did. Power is awful. Today though the company threw a little high octane gasoline on the earnings fire by disclosing that the SEC is looking into the long-term care charge that the company took. I don't like any accounting irregularity. But I do not think this one is nearly as material as investors who bailed obviously did.
There was nothing to write home about with GE. They had some decent cash flow and CEO John Flannery is trying to get his arms around errant divisions and a gigantic pension hole.
But was this a reason to sell industrials? Absolutely not. GE is all by itself. The rest of the group, as exemplified by the stellar numbers from United Technologies (UTX) are just fine, thank you. So here's where I come out: we had two terrific sessions and one real ugly one. Pick your poison. I say buy some good stuff in the bad session and offload some losers or take profits in some good ones and lament we now seem good for fifteen trading days a week.