Gotta blame it on something, Gotta blame it on something Blame it on the rain that was falling, falling, Blame it on the stars that did shine at night  – Milli Vanilli

I mentioned earlier that it “felt” like the markets were likely to follow the Ruidoso weather pattern of late — sun in the morning, rain the afternoon. In other words, I was looking for an intraday fade today and that’s indeed what’s transpired.  Wonder what the mainstream media are blaming today’s sell off on? Let’s look:

• Stocks Sink on Corporate, Euro News

Ah, that explains everything!  That ol’ “corporate, Euro news” sell-off catalyst that they talk about in the text books. What? No?  Oh, my bad.

Anyway, other than selling those Ciena CIEN calls for a big one-day profit that I explained in this earlier blog post, I’m sitting on my hands still.  Here’s some more of the feedback I got from subscribers just this morning:

Cody you are the MAN when it comes to making great earnings calls!  Nailed CIENA today thanks to your insights. Your earnings calls alone are worth many times the subscription price of your great service!  — Ron

Great calls, Cody!  You made me some money this morning!  — Bill

If you’d like to see how every trade I personally make in the coming days, weeks and years, come check me out at TradingWithCody.com.   At any rate, I’m actually not just hand-sitting.  I’m doing lots of homework on the stocks we own to stay up on top of the news, trends, etc.  Anybody else notice that Riverbed RVBD and Sandisk SNDK are up big from recent lows where we were buying calls? Gotta have some patience to let these things play out after making the bets we’ve made, as I keep preaching.   Anybody else looking at Apple AAPL and wondering if it might have a good 10%-15% move in it if it can get through the $400 level? Google GOOG got legs above $540 or so?

Speaking of preaching, Milli Vanilli and the stock market, before we go, take a look at this funny comment from this classic MTV video now on YouTube, not on MTV:

Think about that comment and think about how doomed Live Nation LYV really is, when you extrapolate what a complete collapse of stadium/platinum selling artists is going to do to that company and that industry in the next couple decades.

Come to think of it, I’m not really sure how I made the connection from Ruidoso rain to Milli Vanilli to today’s market action to Live Nation’s being doomed. But it worked, no?

Thanks for reading, see y’all tomorrow.

Flattish to down open early here this morning.  Since nobody cares about Greece’s sovereign debt problem or the U.S. budget crisis this week, maybe some macro economic news in Estonia was softer than expected today and we could focus on it.  Maybe a report out of Singapore about their savings rate increasing again should get us panicked tomorrow.

Then again, let’s continue to try to focus on what matters instead.  Speaking of which, yesterday in the closing hour, I’d bought some very high-risk Ciena CIEN calls because they were due to report this morning and as I’d mentioned at the time — sure was a lot of Ciena negativity (Cienagativity?) heading into the report.  As I wrote at the time on my TradingWithCody.com in I’ve now bought a little calls in…:

Ciena reports earnings tomorrow morning before the open and I’ve read nothing but explanations of why they are likely to really miss and guide lower and get crushed tomorrow.  And that might very well happen.

I think expectations are very low for Ciena heading into that report tomorrow morning. The problem is that if the company does disappoint there’s probably a 10% underside. That said, I’d expect Ciena comes in okay and that the stock pops tomorrow.

I’ve now bought some Ciena calls dated in October, working on strikes between $13 and $15 or so.  This is a very aggressive kind of trade, using such close expiry dates and out-of-the-money calls to boot, which means we’re likely to either catch a bin tomorrow or will end up with probably close to a total loss on the capital risked here.  We’ve had some pretty consistent and decent luck with these pre-earnings trades. –

The report is out and it’s pretty good, especially for those bulls who were looking for some margin expansion from the synergies of the major Nortel optical acquisition.  With both Cisco  CSCO and Ciena, the margins are likely to expand in coming quarters thereby driving earnings much faster than revenues.  Juniper JNPR, F5 FFIV and Akamai AKAM on the other hand, are topline growth stories as much as they are earnings growth stories for the next couple quarters at least. Margins are the main reason Ciena is up today — the topline was just okay.  Then again, with as much negativity as there was around Ciena heading into the report, maybe “just okay” is good enough to stimulate this pop today.

At any rate, Ciena is indeed up more than 17% as I type this.  The October calls we were buying yesterday are up double or more in value in less than one day’s action.  And I’m selling them down.  One of my old mentors used to always tell me, “Always remember that a trade is a trade is a trade.”  Meaning that you don’t want to confuse a trade with an investment.  We bought these calls as a trade and the trade worked out so let’s lock it in.  I’m keeping only about 1/5 of the calls I’d bought yesterday along with the core common stock position in Ciena that I plan on holding for the longer term.

If you’d like to see how every trade I personally make in the coming days, weeks and years, come check me out at TradingWithCody.com.   Here’s some of the feedback I got from subscribers just this morning:

Ok Cody, you convinced me, I’ll subscribe. After the CIEN trade I followed you on, I made 75% in 20 minute this am, more than enough for a 1 year subscription. Thanks, I’ll be following you. – Jeff

Thanks for ciena trade– made my week. Keep up the great work.  – Teri

You’re one of my heroes. You nailed the internet/connectivity, social media revolution before anyone else. You deserve your success! — Barry

Rock on.

Apple CEO Steve Jobs resigned last night.  Let’s discuss.

I’ll reprint the entirety of what Steve Jobs, the now ex-CEO of Apple, wrote in the letter he sent out at 4:40pm, two minutes before Apple itself followed his email blast up, with the formal announcement of their own:

To the Apple Board of Directors and the Apple Community:

I have always said if there ever came a day when I could no longer meet my duties and expectations as Apple’s CEO, I would be the first to let you know. Unfortunately, that day has come.

I hereby resign as CEO of Apple. I would like to serve, if the Board sees fit, as Chairman of the Board, director and Apple employee.

As far as my successor goes, I strongly recommend that we execute our succession plan and name Tim Cook as CEO of Apple.

I believe Apple’s brightest and most innovative days are ahead of it. And I look forward to watching and contributing to its success in a new role.

I have made some of the best friends of my life at Apple, and I thank you all for the many years of being able to work alongside you.

Steve

–

First, as a human being, I wish Mr. Jobs well and hope his health returns.

As investors in this company, this might actually remove one of the largest overhangs on this stock — the concern that Steve Jobs would leave at some point.  If you think about it, it’s likely that one of the reasons Apple has continually traded at a discount to the S&P 500 despite growing so much faster than just about any other company in that index for the last seven or eight years at least, is because of the concerns about Steve Jobs’ health. His departure, ironically perhaps, removes that overhang and might actually let this stock’s multiple expand to something more closely resembling the rest of the stocks in the S&P 500, who don’t have Steve Jobs running them either.   Bidu and Best Buy, for example, both have higher multiples on just about any metric, than Apple does. Netflix, CRM?  Their multiple is a multiple of Apple’s despite not having either the defensible positioning or true platform de facto standardization that Apple does. And they don’t have Steve Jobs running their company, much less as chairman, like Apple still does either.

Meanwhile, the iOS/iPhone/iPad platforms have become de facto standards in the marketplace and the virtuous cycle of developers creating apps and hardware that work for those products driving more consumers to those products driving more developers to create more apps…the Apple eco-system is unaffected.

The stock was down 5% last night after this announcement, but is now down less than 2% this morning in the pre-market action.  I wouldn’t be surprised to see this stock swing to both the down and upside during the intraday action today, and whether it closes higher today or not, I plan on holding my common and calls in this name or even buying more if the stock does get back down 5% lower or more today.

I first bought Apple here on these pages back in April 2003 at $7 a share and I held it til I closed my hedge fund and became a TV anchor.  I’ve bought it back since I started trading again this year and I remain very bullish on Apple.  Indeed as I’ve predicted before, I do think it’ll be a $1000 stock someday.  And this news, despite the sadness that it elicits in our hearts, doesn’t change either the target price or the timing of when we might get there in my analysis.

And if you’d like to see how I trade Apple in the coming days, weeks and years, come check me out at TradingWithCody.com, where you can see all my trades in real-time and get access to all of my investment books.  For a limited time, you can get a free one-week trial with just your email address by signing up here.

In this week’s Revolution Investing, I outline why I’ve been closing out some shorts this week and was adding to my tech longs in last week’s market crashes. It’s all about emotions out there right now.  In the newsletter, I write:

“The bears are celebrities again, and even though very few bears have caught this downside swing and ensuing volatility very well — the curse of the perma-bear is that they can’t differentiate timing — but they are loud and full of new predictions of new doom.   And the bear websites, the bearish pundits, the bearish hedge funders, are flaunting their genius, even as they wonder how they missed most of the move down.   They’ve now been shorting all rallies and are what they should have been at the top six weeks ago — aggressively net short.   And see, all that short stock out there must be bought back at some point — either lower or higher (or at these levels, too).  The  bears are now outright shorts and they’re cocked and loaded and feeling brave.”

Not much bear fear out there right now.  And how about the bulls? From the newsletter:

“Meanwhile, the bulls are beaten and depressed.  The emails from my (mostly formerly-) bullish money manager friends are full of doubt.  Indeed, most bulls (aka former longs) have been puking up most of their biggest positions to raise cash and try to salvage what was just a few weeks ago a good year but is now probably down 1-10% on the year.”

I’d like to ask you guys the same thing I asked subscribers of newsletter and of my independent trading service, TradingWithCody.com, “Who’s more scared right now, the bulls or the bears?”

Because when the answer to that question is as strong on one side as it is right now — do you know any bears who are scared right now? Do you know any bulls who are NOT scared right now? — it often coincides with a big turn in the market.

Not sure Apple, Google, Riverbed, Marvell and the others I’ve been buying back recently are truly bottomed out or not. But I’d rather be a buyer when the bulls are overwhelmingly scared, and I do think they are. Do you?

Some of the comments I’ve gotten so far:

I’m a bull and “scared” and I agree with you that the bears are not scared at this time. Accordingly, as a bull I see this as a good time to play the contrarian move and stay bullish.  Thanks for the easy money today that I booked on the RVBD calls. It was hard to buy them yesterday with the underlying stock of riverbed looking as bad as it did yesterday….I thank you!  – Les

I think the bulls are more scared because the prevailing media sentiment is one of doom and gloom. Most stories today cover the bump as “hopeful but unlikely speculation that the fed will intervene” followed by a slew of reports on slow housing starts, more disruption in Europe, etc. And personally it’s not hard to be scared when every rally of late seems to be followed by a steep fall.  There’s my 2 cents but I’m ever the optimist and roll my eyes whenever I hear another “apple can’t do it this time” story.  – Gregory

I vote that the bulls are more scared now, including myself – Bill

So you tell me, “Who’s more scared right now, the bulls or the bears?” Shoot me an email to contact@TradingWithCody.com or leave a comment below.

Cross-posted with my independent site, TradingWithCody.com.

“If the good Lord had intended us to walk, he wouldn’t have invented roller skates.” – Willy Wonka

Good day to you and welcome back to the skating rink.  I’ve seen several headlines trumpeting how “The Bulls Are Storming Wall Street” and whatnot … but the markets themselves are up just over 1%, and given that action we’ve seen the last few weeks with 3% to 5% intraday moves seemingly routine, I wouldn’t be overstating a 1% move.

Meanwhile, I’ve not made any trades yet today, but I do see the LPS back above $17 (we started shorting it in the mid-$30s, mind you) on an incredibly rare 3% rally and I might add some puts in there or maybe just short some outright again.  We’ll see, but I’m not doing it just yet.

And before I go, here’s a quick note on the smartphone revolution from J.P. Morgan’s analysts:

Global Communications Equipment: Handset Model Update: Reducing Numbers on Faltering Consumer, But Increasing Smartphone Ests. We are reducing our 2011 handset shipment growth estimate to 6.4% from 6.8% but increasing our smartphone forecast for the full year. Consumer indicators are certainly shaky globally but not clearly in a downward trend yet. Our intention in this update is to begin factoring in the potential for worse consumer dynamics in H2 without going all the way to a recession scenario. Should consumer spending reverse in H2 we would expect a rapid reduction in phone sales from the levels we currently forecast as well as lower smartphone growth. At this point, however, we do not believe the data supports this scenario.

Two notes — you never, and I mean, NEVER want to take your macroeconomic analysis from these sector specialists.  That’s not to say that an economic downturn isn’t possible or even imminent (I think we’ll have some more bubbles before the next crash, but we’ll have to be flexible in case the realities turn out different than we expect), but I’ve seen many a great analyst chase himself out of stocks like Apple and Netflix over “concerns about the macro” and they are usually chasing the latest economic numbers as they do it.

But where you do pay attention to sector analysts is in the trends of the numbers that they’re modeling for the sectors that they specifically cover. In this case, the analyst is covering the handset sector, and he’s making some internal tweaks to his sector models — secular growth of the smartphone within the cyclical growth of the broader handset sector is one of the bases for the smartphone revolution.