Disappointing -- but not as disappointing as we thought. That's the prevailing theme behind some of the moves we've seen lately -- and the moves, acerbated by the thin nature of the market, can take your breath away.
Take the miss by Allergan (AGN). As soon as the report came out, the services that comment on earnings versus expectations put out bulletins saying it was worse than expected. But the more important takeaway was that, although it was worse than expected, it wasn't much worse than expected, so the stock actually rallied on the news.
Same deal with Electronic Arts (EA). The quarter looked terrible. We learned for certain that the key Star Wars launch was a bust. But it wasn't so much of a bust that it caused people to avert their eyes and sell. The announced buyback cushioned the disappointment, which wasn't that disappointing. So, we got a rally.
We saw this yesterday with Cummins (CMI), too. It was certainly worse than expected with a dramatic slowdown in North American orders, but it wasn't dramatic enough to knock the stock down further, therefore it rallied.
And we saw it in Apple (AAPL), which just keeps being propelled higher and is now higher than when it reported. In part, it's because others seem to be faltering, notably Google (GOOG), and partly because the launch of the new iPhone is coming and we know from the monster build at Cirrus Logic (CRUS), the audio supplier to Apple, that Apple senses gigantic demand.
Bad -- but not so bad as to make people sell.
So why not buy? Because if it is bad but not so disappointing, then the shorts have to cover and the longs smell a bottom. That's the dominant and absurd theme of this week's trading.