Day Trading Thoughts For Mon. Mar. 9

Discussion in 'Trading' started by erikrkolodny, Mar 9, 2009.

  1. erikrkolodny

    erikrkolodny ET Sponsor

    As we gear up for what promises to be a very busy day of trading today, let’s take a break for a couple of minutes and discuss a side effect of this ongoing financial crisis which is going to affect traders- particularly day traders- directly. A few weeks ago, I wrote a piece about the trader tax being discussed in Congress. It is still up in the air as to whether that comes to fruition; of course, if it does, there will be no trading industry. But of more direct and immediate import is this SEC dictum:

    http://www.sec.gov/news/press/2009/2009-41.htm

    Section 31 of The Securities Exchange Act of 1934 requires transaction fees to be paid to be SEC from the exchanges as well as the National Securities Association. This section of the code bases the collected fees on the total dollar amount of sales of securities traded on the varying exchanges. The annual adjustments to the applicable transaction fees are to be made annually. Well, if the dollar value of shares transacted declines (as it consistently has been) and there is a ruckus about giving the SEC more money, in the words of Hal Holbrook from “Wall Street,” “Somebody’s got to pay.” Well, next month (approximately), the Section 31 rate of fees which are levied on all equities trades will nearly quintuple from $5.60 to $25.70 per million dollars of trades done. Thus, if you buy $500,000 of stock and sell $500,000 of stock, you break even for the day minus commissions minus $25.70 (instead of $5.60). Now, this does not sound like a huge number until you really sit down and figure out your costs. I certainly would not put myself in the ‘large trader’ category volume-wise as what I typically do is vulture in on certain spots in size and not trade a lot otherwise. But, I did some rough math and found that through Friday’s trading, I’d traded approximately $78 million dollars (for emphasis- not 78 million shares, but $78 million dollars) worth of stock this year (admittedly less than, say, the year 2000 when prices were a lot more expensive). Well, at approximately $20 of an increase per million dollars traded, that’d imply $1,560 more out of my pocket for just over two months of trading or right at $9,000 of slippage annually. I know everyone reading this has a different view on what $9,000 is, but let’s just leave it at $9,000 is $9,000 is $9,000; I can think of a lot more things I’d rather do with $9,000 than pay additional tax to an agency which has proven ineffective time and again. Typically, on prop reports/transaction sheets, these fees will be reported on the ‘other fees’ section so I just want to make sure each of you is aware of what is going on and that this is a universal fee no matter where you trade. But, be well aware that it is going to happen and that a few dollars here and a few dollars there definitely adds up to a lot of money over time- particularly those of you who trade hundreds of millions of dollars of stock (or more) annually because you are about to have to work that much harder to earn a living.

    Overnight, the Nikkei in Tokyo closed at a 27 year low, down about 1% while the Hang Seng in Hong Kong fell almost 5%. The selling extended to Europe with the bourses down about 1% to 1.5% across the board. Futures state-side are also down at this early writing. However, the late afternoon rally Friday along with the news of the MRK-SGP deal may well provide the impetus for some sort of bid all day today. Financials are mixed in the early-going, but not down very hard. Look for an extremely choppy session; prices should open down and there will likely be another little push lower, but if there is no volume spike on the sell-off, do not be surprised whatsoever to see a rebound off of the Friday bounce. Trade with extremely tight stops/out points all day and please only pick spots; today is an easy day to lose a little bit in a lot of little trades as rumors will be out all day about possible bankruptcies along with varying Congressional proposals



    Reiterating-
    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

    GERN, STEM, CYTX- President Obama to formally lift ban on embryonic stem cell research today; best trade of day (like before 8AM ET) in some fashion (particularly if there are large bids in any of them and they begin giving ground as early-risers take sudden profits on the expected news) will likely be very early in the morning in any of these as they are all bid well up

    EBS- closed near a high

    AET- closed near a high

    ARST- closed near a high after posting great earnings

    BDX, BAX- featured on “Mad Money” on Friday night

    SGP- being acquired for MRK for $10.50 cash plus .5767 shares of MRK

    ROH- bid higher again; worth watching this issue and DOW today on a follow-up from Friday

    AMZN- upgraded to buy at Piper Jaffrey

    ADS- confirmed guidance and JP Morgan says recent sell-off is overdone

    CF/AGU/TRA- CF rejected AGU’s proposal as inadequate and reaffirmed its desire to acquire TRA

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

    RBCAA- no bounce for this bank in closing at a new trend low

    GIFI- broke to a new trend low and closed near the bottom

    ALJ- closed near a new low

    ETH- closed near a new trend low

    TKR- closed near a new trend low

    AFL- cut to sell at UBS with a price target of 8

    MRK- acquirer of SGP for aforementioned takeover price

    GOOG- according to analyst, GOOG revenue decelerated ‘rapidly’ in last month

    PBR- poor earnings posted late Friday afternoon




    Earnings:

    MON MAR 9 BEFORE

    AOB SSL


    MON MAR 9 AFTER

    AVAV CASY GFA

    Good luck today.

    Erik R. Kolodny