Day Trading Thoughts For Fri. Feb. 6

Discussion in 'Trading' started by erikrkolodny, Feb 6, 2009.

  1. erikrkolodny

    erikrkolodny ET Sponsor

    So, once again yesterday, the question of the day was “what sparked the morning rally?” Basically, details began to seep from the White House about the upcoming bank rescue package. Apparently included on the rumor mill is that the plan will be smaller than originally expected with a centerpiece of government guarantees and insurance on troubled assets. Most importantly, according to articles all over the business news media, the latest round of discussions also address pricing of the securities- the hardest concept to bargain upon as discussed in the good bank vs bad bank post a few days ago. At this point, the government would buy toxic/illiquid/bad/choose your word assets below the ‘carrying value’ (i.e. market value) of said assets, but not at fire sale levels. The plan could be the impetus for a major accounting problem for the banks as they’d have to write down the values of the assets resulting in losses, but supposedly the administration is attempting to find a solution to rectify that issue which may include a temporary halt of standard accounting rules. Or there could be a change to the rules, i.e. maybe the losses would be amortized over a period of years. All of this is over my head as far as trying to figure it out except for one thing- how do we trade off of this? And I know one thing as far as yesterday was concerned: buy the rumor. Part of the weakness in recent days has been the delay in a ‘fix’ for the economy as many people were optimistically albeit unrealistically thinking that a plan would be released as soon as Inauguration Day. As that hope dissipated, so did asset prices. Thus, what the buying was yesterday was a lot of hope. The sum of all of this is as such: the sooner that a plan is ratified, the sooner and harder that the market will rally…but if the market does not rally on the plan and the ‘sell the news’ phenomenon went into effect, things can get perilous rather rapidly.

    Markets in Asia bounced overnight with prices up about 1%-2% across the board. Bourses in Europe are higher as well by a fraction of a percent following Wall Street’s rally yesterday. Currencies are quiet this morning after the huge rise against the yen by the dollar yesterday with commodities and bonds quiet too. This will all change with the jobs report at 8:30AM. A terrible number seems to be priced in. What will truly drive stocks today is the rumor bill regarding the stimulus plan. Futures are down now, but the upside bias from yesterday will likely kick in no matter the number for the early morning. After that, it will be wildly choppy with the rumor of the moment dominating the situation- truly a difficult day trader’s market.

    Please understand that if the ideas do not get to the hoped for set-ups cited below, more often than not, one should not blindly trade the symbol next to said idea.
    If the whole story is not there -
    If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified-

    Good- The following stocks have good news and/or a strong technical pattern

    PBI – beat earnings for quarter

    BAC- closed near a high amidst hopes it will not be nationalized

    CI- closed near a high

    NFLX, MOS- mentioned positive on “Mad Money”

    TSYS- good earnings

    EXP –closed just off of a high

    WW- closed near a trend high

    AMX- good earnings

    BIIB- guided year slightly above estimates

    Bad-The following stocks have bad news and/or a weak technical pattern

    HWAY- warned badly

    PFWD- warned on its earnings

    MTD- terrible earnings

    SRCL- missed revenue estimate

    THOR- missed earnings estimate

    HIG- earnings OK, gave decent guidance, but then oddly said that its guidance will likely be incorrect.

    SKX- bad earnings

    RATE- bad earnings

    NWS- bad earnings, but doing major cost restructuring which may well prove to be a positive for the stock particularly if the market rallies

    MELA- closed near a low

    ASFI- closed near a low

    AIV- closed near a trend low

    LTM- closed slightly off of a low







    Good luck today.

    Erik R. Kolodny