Beats Outnumber Misses By Large Margin – Market Dip Should Be Shallow

Posted 9:30 AM ET - Yesterday the market drifted lower and it closed right on the 100-day moving average. I expected better performance ahead of Apple's earnings. The 100-day moving average has been crossed so many times that it has little technical value. Stocks will probe for support this morning and I believe the drop will be contained. Apple posted in line earnings, but the expectations were high. Call open interest was double the put open interest and speculators were betting on a pop. As I mentioned in yesterday's comments, when a trade is crowded it rarely works out. I believe the bigger issue for Apple is that the cell phone refresh rate is lengthening. There aren't that many "must have" features on new phones. Apple is weighing on the market this morning. If I look at all of the releases after the close Tuesday and before the open today, the beats overwhelmingly outnumber the misses (4 to 1). That leads me to believe that the early decline will quickly find support and buyers will nibble. I did hold two call positions overnight and I will probably take a little heat on them this morning. The next level of support is SPY $212. Google and Amazon should post decent numbers after the close Thursday. This is the climax of earnings season and there will be many releases in the next two days. Down opens have been friendly to us and I plan to favor the long side once support has been established. I already have my sights set on a great one that fits the pattern. The last week in October and the first week in November are historically bullish. However, that is partly due to negative price action in September and October. We haven't sold off so the upward pressure will not be a strong. The threat of a December rate hike looms and that will keep a lid on the market. If the election polls tighten, the market will not like the uncertainty. Let the early decline run its course and day trade from the long side today. If we close above the 100-day moving average, carry a few overnight longs. . .

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