Apple

And here they are:

APPLE 2Q REV. $39.19B, EST. $36.87B
APPLE 2Q EPS $12.30, EST. $10.02
APPLE SOLD 35.1 MILLION IPHONES IN QTR, EST. 31.2M   
APPLE 2Q IPOD UNITS SOLD 7.7MLN , DOWN 15%            
APPLE 2Q IPAD UNITS SOLD 11.8MLN                      
APPLE 2Q GROSS MARGIN 47.4%, EST. 42.8%              
APPLE 2Q MACINTOSH UNITS SOLD 4MLN , UP 7%            

But:

• APPLE SEES 3Q REV. ABOUT $34B, EST. $37.49B
• APPLE SEES 3Q EPS ABOUT $8.68, EST. $9.96
  

Presented with little comment except to give some context for the current weakness in what was the world's largest market cap stock a few days ago. In the last 11 days, Apple has dropped over 12.5% - the largest such drop since January 2009 - as today sees the stock's fall continue to yesterday's lows down over 2.7%. With just a few hours to the event-horizon, options traders are active and stock volume run-rates are high as selling pressure dominates.

All you need to read.

UPDATE: Apple -2.4% at lows of yesterday now

Apple is down 1.5% pre-market and comfortably back below its 50DMA on a top-line (and notably activations) miss from AT&T among other anxiety-inducing sentiment this morning. Perhaps what is really providing all the performance anxiety is the extreme expectations that are piled upon this greater-than-bellwether stock that has become the market. As Bloomberg's chart-of-the-day notes, Apple needs to surpass estimates by a wider margin than most of its peers in the S&P 500 in order to satisfy investors - if history is any guide. On an adjusted per-share basis, profits have beaten estimates by about 19% on average over the past seven years - a true under-promise over-deliver strategy. As Colin Gillis of BGC Partners notes, "Apple will need to smash records to keep momentum" as surpassing the $9.98/share by 20% is an impressive feat indeed as they point out that seven of the nine times Apple's shares have fallen the day after earnings has been when earnings beat by less than 20%. Performance anxiety indeed.

It' quiet out there... Too quiet, as everyone is awaiting the most important earning number of the quarter - that of Apple. Everything else is secondary. Here is how the secondary data is driving the market so far in the trading session.

Follow the indicators or BTFD?

Netflix headlines may appear rosy as top and bottom lines were a beat but guidance on revenues and subrscriber adds perhaps rings the death knell on this mythical beast...

*NETFLIX SEES 2Q NET ADDS BELOW THOSE OF 2010 :NFLX US
*NETFLIX SEES 2Q REV. ABOUT $873M-$895M; EST. $893.4M :NFLX US

We can only hope that AAPL does not miss in any way on any metric ever as NFLX is now down 18% from Friday's close...

It appears that when it comes to mocking consensus groupthink emanating from lazy career 'financiers' who seek protection from their lack of imagination and original thought, 'creation' of negative alpha and general underperformance (not to mention reliance on rating agencies, only to jump at the first opportunity to demonize the clueless raters), in the sheer herds of other D-grade asset "managers" (for much more read Jeremy Grantham explaining this and much more here), David Rosenberg enjoys even more linguistic flexibility than even us. Case in point, his just released trashing of the latest Barron's permabull groupthink effort titled "Outlook: Mostly Sunny." And just as it so often happens, no sooner did those words hit the cover of that particular rag, that it started raining, generously providing material for the latest "Roasting with Rosie."

Europe's overnight reality check is weighing on stocks broadly but two names standout. Apple is down once again, and below its 50DMA for the first time in four months but it is Wal-Mart that is struggling under the weight of the Mexican debacle. Walmex is down over 25% at the open and WMT opened down over 5% on huge volume. Apple and Wal-Mart bounced out of the gate off those lows but are leaking back now - both below their VWAP.

Has the case really gone cold? Or, are those who are in charge of the investigation, the "regulators" and the trustees, simply spraying teflon on every piece of sticky evidence that could lead to criminal prosecutions?

Apple is scheduled to report earnings on Tuesday April 24th.   Our analysis is simply to try and match the enthusiasm of the recent price movement and fundamental story of Apple in relation to what has happened in the options markets. 

Price action for Apple stock over the past few weeks has been noticeably poor.  Not only has it traded down 10% from its April 9th closing high of $636 to $572 today, but it has led the market several times with somewhat dramatic intraday reversals.  Even so, the options market has not yet expressed this same recent bearish opinion on the stock. 

Maybe it is the activity in Europe that made the markets feel more volatile than the weekly changes show. Or maybe it was that the futures traded in an almost 3% range – from 1,359 to 1,390 with several 0.5% swings during the course of most days. Market darling Apple isn’t helping calm the market either. That can reverse on a moment’s notice, or a great earnings release, but the momentum that was dragging more and more hedge funds into the trade, is now working in reverse as stop losses are being triggered. So often lately, the bulls are able to point to a decent tape in face of weak data and no stimulus, and this week ended with the opposite. Bulls will be nervous that decent earnings and a mega-plan from the IMF failed to provide strength to the market. So, it was a strange week that was more volatile than the weekly changes show, and where some real cracks are being exposed.

On April 16, Argentine president Cristina Fernandez de Kirchner announced that her Argentine government would expropriate and re-nationalize YPF, an energy company operating mostly in Argentina founded by its government in the 1920s and de-nationalized in the 1990s. Repsol, a Spanish company that owns (owned) 57% of YPF called the act “illegal and unjustified” and vowed to sue. As Paul Brodsky and Lee Quaintance of QBAMCO note, in times past such expropriation would surely be an act of war. FdeK’s timing was brilliant, to re-nationalize the Spanish-controlled energy company when Spain’s economy and funding are teetering means the Spanish government and businesses domiciled there lack the clout to make demands of Euro confederates. The political calculus among leaders of sovereign governments reduces to short-term domestic political benefits vs. threats of economic or military retaliation but with regard to natural resources, the QBAMCO pair critically note, the bigger implication that it is sovereign vs sovereign as the paper bets representing global production and resources that we call “capital markets” is in jeopardy of becoming a sideshow. Baseless paper money, fractional banking, revenue shuffling, financial returns, ever-increasing debts, unwarranted confidence building, nominal output growth and politicians posing as policy makers cannot sustain the most basic needs of societies.

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