Apple (AAPL) Asks "What Recession?"

Wednesday, July 21, 2010

Apple It's ShowtimeApple does what Apple does, VM Ware and Wells Fargo join the fun

Apple (AAPL) did last night exactly what Apple does, soared passed any and all expectations. With consensus expectations for EPS at $3.11 AAPL reported $3.51 and added a top line beat by $1 billion for revenues of $15.7 billion. EPS guidance was light as usual but the market has learned this game and enjoys it. There was nothing to not like in the AAPL report. The 61% year-over-year jump in iPhone shipments along with 33% gain in Mac sales fueled much of the gains, not to mention the 3.27 million iPads already out the door. AAPL continues to be in cruise control at 85 miles an hour on open highway, shares are up 4.3% pre-market.

VM Ware (VMW), a leader in virtualization solutions, reported as well coming in 2 cents ahead of estimates for EPS of $0.34 and a beat on revenues as well with $674 million. Guidance was strong and shares are up 4.4% pre-market. Wells Fargo (WFC) delivered on revenues this morning matching estimates for $21.4 billion while handily topping EPS expectations at $0.55 versus $0.48 consensus. Shares of WFC are trading 5.6% higher this morning.

Pressing short side terrible call

My thought yesterday to press on the short side was perhaps my worst call of the year so far. I tried averaging into more on the short side for the first hour and then gave up and let the market run. Sentiment dramatically reversed and pre-market positions of key earnings stocks were no indication of how the market reacted on the open. Pepsi (PEP) open lower but buyers immediately stepped into reward the company for its impressive earnings report rallying the stock throughout the entirety of the day and closing it 4.3% higher. Goldman Sachs (GS) went from trading down over 2% pre-market to finishing the day up 2%. Even IBM (IBM) mounted a strong rally back to close much of its gap down and only close the day 2.5% lower.

Yesterday's rally was a very strong reversal leading many to believe the bottom may be in for the year. Gains are meant to be taken on the short side and I have perhaps held on too long. Ultimately, 1,100 is the crucial short-term level in the S&P. Should we clear that, all my shorts will be taken in and I'll put my bull hat back on.

Disclosure: Long VMW; SPY, IWM puts. Short SPY.
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