Buy The Rumor, Sell The News: AAPL, IBM

The markets are lower this morning, which is not all that surprising given the strong multi-day run we have experienced. There is an old saying in the market, "buy the rumor, sell the news", and that looks to be in effect today.

You see, many thought that AAPL would report very strong earnings. That is why the stock ran up nearly 15% in the last 10 sessions prior to reporting earnings. Apple's earnings last night were fantastic, but that doesn't mean people are going to take profits after that strong runup.

You may hear things like they didn't sell as many iPads as the Street expected, or that gross margins were a little low. Don't buy it. The company trounced earnings estimates, and that is the most important factor. Earnings growth drives stock prices, and as earnings estimates continue to be revised higher for the company, the stock will regain its footing.

Ditto IBM, which reported solid earnings but there was no way the stock was going to be up on the news given how much it has rallied in the last several weeks. Goldman's stock is up nicely after beating its recently reduced estimates.

Asian markets were up overnight, but after China closed it was reported they would raise their 1-yr lending rate 25 basis points. That has the dollar rallying today, and is weighing on commodities. Gold prices are down nearly -2.3% to $1340, while oil prices are down to $80.88 today. Gold has also had a big run, so some consolidation there is warranted.

The 10-year yield is up to 2.52% today, and the VIX is rising 5% today to 20.10 so far.

Trading comment: I think many of these reactions to earnings are normal, given that the stocks are up a ton and expectations for earnings were already very high. The fact that AAPL, IBM, VMW, etc. beat earnings estimates nicely should mean that the stocks will be strong again after some profit taking and consolidation. The trends that drove the earnings growth are still in place. So I'm being patient, letting the stocks come down, and then deciding which positions I'd like to add to.

long AAPL, VMW