An interesting day! The NASDAQ had a lot of the market direction action, but the most spectacular had to have been Google Stock. A blunder cost the company 20 billion in market cap in a matter of an hour as the stock collapsed 8% on the unofficial release of its earnings. Not only was that a disaster but Google stock was stopped from trading which made investors even more nervous. The stock reopened at $680. Option prices swung all every which way. I tried to buy the Nov 17 2012 $675 call options but I didn’t get filled at my price of $20.00. Earlier it had traded as low as $16.80. For Google Stock is was the worst day since Jan 20 when the stock fell 8.4%. One of the more disturbing aspects of the earnings report was that it seems to show that while earnings per click are up, so too are the costs and Google seems somewhat unprepared for the explosion of hand-held devices and tablets which a lot of their revenue streams are not taking advantage of. This concerned a lot of investors including
On other news Microsoft Stock fell after the company missed estimates and revenue came in considerably lower than the same quarter last year.
BB&T Corp fell 7.1% on its earnings news which after hours the CEO tried to turn the negative into a positive as he talked about the 9.4% increase in loan growth. Net income was 469 million for the 3rd quarter versus 510 million in the second quarter, but the worst for investors was the company’s guidance, that the margin would fall “to the mid-70s% range in 4Q12”. The stock has been up 22% this year so it was a blow off by investors. This stock may be setting up for some very nice Put Selling opportunities.
In other news Chipotle Mexican Grill Inc., (Stock symbol CMG) had a very bad day with the stock tumbling 10% after hours down to $256. The company missed analysts estimates by just 2 cents but forward-looking statements indicated there could not be growth for 2013. The shares of Chipotle Stock have literally plunged this year as investors worry about the company’s future. This company is in competition with McDonalds Stock and Yum Stock. In my opinion both McDonalds Stock and Yum Stock are better stocks for investors.
A 42% decline to Oct 18 2012 in Chipotle Stock
Market Direction For Oct 18 2012
All of this and more weighed on the stock markets and market direction ended in the red for all three indexes. The NASDAQ fell 1% on the day unable to contain the damage from primarily Google Stock but also from Apple Stock. The S&P market direction was down a modest quarter of a percent while the Dow Jones market direction was down just six tenths of a percent.
Stock Market Crash of 1987
Friday also marks the 25th anniversay of the 22.6% (Dow) one day crash of Oct 19 1987. I recall a lot of that day. I was disappointed, but not surprised, by all the negative articles on the internet which predicted another crash “soon”. This is fear mongering in my opinion. There will always be downturns and crashes in stocks. Fear builds on fear but to fill blogs everywhere with predictions of doom and gloom does nothing to help investors. Telling investors they should “protect” themselves but offering no concrete advice is of no value to investors.
Let’s take a look at today’s market timing indicators at the close of the day to see their prediction for market direction. I posted an Intraday comment today about market direction.
Market Timing Indicators For Oct 18 2012
The stock market direction remains largely unchanged for the S&P although the slight loss for the markets has kept the MACD market timing indicator from giving a buy signal.
Momentum is largely unchanged or neutral although it did slip slightly below 100.
MACD as explained, was positive earlier in the day but the selling managed to keep the MACD (Moving Average Convergence / Divergence ) from giving a buy signal.
The Ultimate Oscillator is now positive as is Rate Of Change.
The Slow Stochastic is signaling more upside ahead.
The Fast Stochastic is also signaling more upside ahead for Friday, options expiry.
Market Direction Outlook For Oct 19 2012
There is nothing in the market direction indicators that would advise concern of a major pullback. The NASDAQ decline today was unexpected but considering the blunder by Google it certainly is not surprising. Market direction movement should continue to grind higher as confirmed by the fast stochastic and the slow stochastic. A close in the green should turn MACD into a buy signal which means market direction will be confirmed as moving higher going into next week.
Friday is options expiry and while lately options expiry has not been met with large volatility, you just never know what market direction is going to end up doing on options expiry days. Right now though market direction remains up for tomorrow.