That 2 – 4% pullback that I have been expecting appears to have begun. It might be a normal precursor to the need for traders to take off some risk ahead of earnings season. In the grander scheme of things, a pullback of this magnitude is a normal occurrence.
The normality of such an occurrence is obscured by the drop in the price of Apple (AAPL). For emphasis, let me repeat much of what I have said or written about Apple and some new observations.
1. Apple is not the only stock in the equity asset class, a fact I mentioned on AppleTrader yesterday.
2. If you are feeling excessive pain from Apple, you are overleveraged or fixated on trading weekly options
3. The stock seems to follow its usual pattern – rally into a new product release and sell-off after the product release
4. Analysts Gene Munster should be given little credibility. He is to Apple what Henry Blodget was to Amazon (AMZN) in the 1990s. Apple stock sold off when his inflated estimates for first weekend iPhone 5 sales were off target. Then the stock sold off again when he lowered estimates. Does this make sense?
5. You should have taken some Apple off the table. It was just prudent investment management. I did so at about $655. Cody Willard did so as well. We both publicized our actions here on Wall Street All-Stars.
Earnings season begins today. Alcoa (AA), one of the worst managed companies in the US will get all the attention. Yum Brands (YUM) also will report results but deserves equal attention in my opinion. One represents industrial output and the other consumer demand. The only similarity in both companies is the impact of business in China. It is universally believed that weakness in China will hurt both companies.
I am down in Dixie and will be making presentations and meeting with clients and prospects all day long. When given a chance I will chime in to the Finance Classroom or one of the other diaries.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long AAPL stock and calls — although positions can change at any time.
Scott Rothbort is also the publisher of the LakeView Restaurant & Food Chain Report, a newsletter focusing in on food, restaurant and agricultural stocks. You can subscribe at www.restaurantstox.com
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