The tech sector took a big hit this week despite strong earnings from several bellwethers -- Apple ( AAPL), Intel ( INTC) and IBM ( IBM) -- while energy was on the rise as oil prices plunged. Ultimately, volatility was the word, as investors got the usual jitters about earnings, and blue-chip indices and bond yields that were flat on the week.As a result of this logic-defying action, the Nasdaq Composite lost 52 points over the four days, while the less-tech-weighted Dow managed to eke out a 9-point gain, and the S&P 500 lost 4 points for the week. Once again, RealMoney's bloggers were all over the market action, and we'd like to share the best of their commentary this week with readers of the TheStreet.com. These posts best capture the intent of these blogs, which is to provide intelligent discussion on the issues each writer sees as most pressing that day. Let's take a look at Rev Shark on avoiding losses, Cody Willard on Apple's "core," Steve Smith on the caution required for ratio spreads and Tony Crescenzi on what a $1 drop in oil means to the consumer.
Rev Shark's Blog: Focus On Avoiding Losses, Not Making ProfitsOriginally published on 1/19/2007 at 8:53 a.m. "The wise man in the storm prays to God, not for safety from danger, but deliverance from fear."
-- Ralph Waldo Emerson After an ugly dip like we had in the Nasdaq yesterday, the question we must ponder is whether it was just a temporary squall of selling that is wringing out a little speculative excess or the start of something more ominous. It is always quite obvious after the fact, but when we are in the midst of a nasty dip it is a very difficult determination to make. On one hand we don't want to be overly fearful and dump good positions that will recover quickly. On the other hand we don't want to ignore energetic selling that can drive things even lower, wipe out our good gains and put us in a deep hole. Where exactly is the line between being prudently cautious and foolishly fearful? It is always going to be a guess and we usually will get it wrong to some degree, but in the stock market it usually pays to err on the side of caution. Our primary goal as investors isn't to make money -- it's to not lose it. It is far more important that we take action that helps us avoid the possibility of losses rather than stand steadfast in the hope of making gains. Above all else, stick to your trading discipline. Even if it proves wrong and you end up selling a good stock on a temporary dip, you will be far better off in the long run for having a system that protects you when we have a dip. It is those times when the market does follow through to the downside that you will be rewarded for being disciplined. I don't know if yesterday was the start of a more significant correction but I do know that the prudent thing to do is to cut some positions that have broken down technically and raise cash. Maybe the market will turn around and head straight back up and you will have locked in some poorly timed sale, but you can make that up far easier than if you simply hold and have to recover from a further decline. Good investing and trading is about discipline. It is not about winging it on gut feelings and guesses. No matter what you do you will be wrong a lot, but being wrong won't hurt you too much if you are methodical in protecting your capital. I believe the market has more downside coming so I'm being particularly prudent with money management and am lightening up quite a bit. At the same time I'm making sure I have a list of stocks that I want to buy should good opportunities arise. Futures are a bit soft in the very early going as none of the earnings reports on the wires are offering any bullish inspiration. They aren't bad reports but just not good enough to inspire the bulls, who have been buying on the way up for many months now. Overseas markets were mostly down but did not take hits to the degree that the Nasdaq did yesterday. Oil and gold are rebounding a bit. The University of Michigan Sentiment Survey after the open may give us a hiccup but most of the news of the day is already out.
Cody Willard's Blog: Getting to Apple's CoreOriginally published on 1/17/2007 at 3:07 p.m. Oh boy, Apple ( AAPL) is up on the earnings platter tonight. This has become one of the most overanalyzed, overscrutinized and overpublicized stocks in history, making Microsoft ( MSFT) look like the market's Jan Brady. I don't know how anyone can accurately gauge the possible expectations for tonight's report. There's been so much hype over the iPhone and its potential that the stock price has little to do with expectations for the near-term fundamentals. That's how I see it, and that means I'm not trying to trade around it before the call. Here's what I think right now:
- Mac sales are booming, and Apple is finally starting to gain some meaningful market share. Of course, when you have 3% of the market, any basis point of improvement can be called "meaningful." That's a bullish thing, though, as 97% of the market remains for Apple to attack. So Mac sales will be on fire. Have the analysts guessed right about how on fire they will be?
- The iPod? Does it even matter what the iPod results are, given that Apple's coming iPhone makes the current generations of iPods seem rather technologically limited? And further, did the analysts guess right about which iPods sold strongly and which ones lagged behind? It's tough to get a game-able edge on this stock with all the iPhone buzz.
- I don't give much weight to the analysis of tech trends and their impact on the iPhone's potential success (or lack thereof) from analysts who completely missed the iPod revolution. Did they suddenly get a clue and think they have an edge there? I'll stick to my guns and the stock that
I've ownedsince $7 at the very dawn of the iPod.
- I do expect that the options-backdating scandal will indeed flame up again and cause some real ripples ahead for the stock. Those might or might not be buying opportunities, but that's not today's business.