Yesterday, stocks took a big dip followed by a sharp upturn following the news of regulators setting a six-month deadline for the largest 19 banks to raise any new capital that they deem necessary following a review of the balance sheets of each of these banks. According to the U.S. Treasury, regulators will complete their âstress testsâ by the end of the 1st quarter. These tests will help determine if the banks need more capital yet the government as has so often been the case did not release specific details as to how these stress tests will work. Should it be needed, banks would have a choice of raising private funds or accepting monies from taxpayers via the U.S. Treasury. Any new monies procured from the government would come via convertible preferred securities which would acquire voting rights should the shares be converted into common stock. These shares would convert at the requests of the individual banks or at the end of a seven-year period of time. Now, at first blush, this all looks negative, i.e. the prospect of nationalizing banks would seem to be a real possibility based on this plan. But the reason that the equities of banks rallied yesterday afternoon was that there is hope- perhaps to be unrealized- but hope that this idea could stabilize the system. Basically, the banks would be ordered to attain new capital if they fail these stress tests; theyâd either be forced to raise it themselves or go to the Uncle Sam well. And even if the banks went to the wallets of the taxpayers, theyâd be giving us the right for new shares rather than converting the shares into common equity as theyâd have seven years to do that. Thus, this whole idea buys time. And time is what we need. For day traders, it is but another example whereby one cannot merely look at headlines and assume the best (or worst); sometimes, a little more analysis/thinking is needed to truly understand the headlines. Markets in Asia were lightly mixed overnight while European bourses are up 1% or so. Banks are very strong in the early going, leading the futures nicely higher. Look ofr that strength to maintain itself most of the day today as a contra reaction to yesterday afternoonâs late sell-off- of course, this is all dependant on those banks but it looks like a relatively quiet day to the upside 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 CRM- terrific earnings FLR- beat on quarter and raised guidance CLF- good earnings FLS- terrific earnings TYL- good earnings OCR- good earnings Bad-The following stocks have bad news and/or a weak technical pattern KBR- closed near a low AGU- closed near a low amidst rumors it will be buying CF ESRX- poor earnings PSYS- abominable earnings; missed estimates and warned on outlook NUVA- beat earnings, but warned a little on revenue guidance DCI- terrible earnings NTES- missed earnings and COO resigned QCOR- closed near a low after bad earnings HUM- closed near a low in a weak healthcare sector CEDC- closed near a low PACR- closed near a low FCSX- closed near a low ANSS- terrible earnings NIHD- bad earnings Earnings: THURS FEB 26 BEFORE AMT ANSS BVF BYD CLR CM CTB CVC DLR EME EP ERF ESV EXH FAF FMX FTO GLBL GM GNK HRP HUN IRM KEG KG LAMR LINE LKQX MIC NDAQ NIHD OCR OEH OMG PCS RDC SUG SWY TEF WRC WTI THURS FEB 26 AFTER ADSK ATHN BID CTV CVA DECK DELL DPL GPS HANS HGSI INSU INT ITMN KSS LEAP ME PSA SBAC SD SGMS SNH SWN UHS Good luck today. Erik R. Kolodny