Day Trading Thoughts For Thurs. Mar. 26

Discussion in 'Trading' started by erikrkolodny, Mar 26, 2009.

  1. erikrkolodny

    erikrkolodny ET Sponsor

    Late last week, the Chinese premier Wen Jiabao made these comment at a news conference: “We have made a huge amount of loans to the United States. Of course we are concerned about the safety of our assets. To be honest, I'm a little bit worried." "I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets." Approximately half of China’s currency reserves are in U.S Treasuries and other notes issued by U.S. government- affiliated bureaus. Now, let’s take a good and a bad from this. The good is that the Chinese government cannot so easily close shop and go home. While it is true that the U.S. government bond market is among the deepest and most liquid in the world, it still is not the easiest thing in the world for the Chinese government to peel off what may well be over $1 trillion of debt securities. Furthermore, there is no real incentive to do so. Other than gold, there is nowhere else for them to put their money and any notable selling by the Chinese government would actually undermine the financial system that much more- and they know it. On the bad side, they are clearly very worried about the whole schematic being proposed by our nation’s officials. They are terrified of perpetually rising deficits which could cause the investments of the Chinese to decay anyway because interest rates could eventually shoot higher. Furthermore, chit-chat like that scares away other investors simply because of the fear that the Chinese may begin selling their vast holdings. The problem is that the Chinese are not the only one worried. The path that the U.S. has chosen to attempt to exit the crisis was called “the road to hell” by none other than Mirek Topolanek, the President of the European Union. He urged EU governments to avoid following in the footsteps of the U.S. and was certainly the harshest criticism yet by any European representative. Now, whether right or wrong, it cannot be argued that there is tremendous apprehension by the world’s economic leaders of what is occurring state-side. In time, this can cause really major problems over and above what is occurring. What if the Chinese and Europeans among others decide that the dollar isn’t worth the paper it is printed on? Already, China’s central bank governor (Zhou Xiaochuan) proposed a single currency for the world (which President Obama wholeheartedly rejected). For day traders, we obviously cannot trade on macro concepts, but we absolutely must pay attention to the newswires because if any of these types of ideas begin to be taken more seriously, headlines can really move markets and affect things as occurred yesterday when the U.S. bond auction went poorly. We’re in bull market mode at the moment thus the large ed-of-day comeback, but the very cool response to the $24 billion auction of t-notes yesterday fueled rumors that the government wasn’t selling its plans well; this caused the market to implode intra-day before said huge rally. And remember- the biggest buyers are foreign so as noted, everyone must monitor their news services for the latest headlines.

    Markets in Asia were higher overnight with prices in Tokyo and Hong Kong both up- over 2% on the Hang Seng. European markets are generally higher, but turning mixed as the session progresses with the DAX in Germany up ¾% of a percent, but the British FTSE down ¼%. The dollar is up nicely, oil is gaining a little, and most other non-equities markets quiet. Futures are up again following yesterday afternoon’s strong rally and there is no apparaent reason for that trend to stop. Look for a quieter day than yesterday, but with an upside bias as the strength seems to be palpable. Remove the ‘trend’ guidepost should financials weaken for whatever reason otherwise trade nimbly as the news flow is not what it was merely two weeks ago.

    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 (preferably to the downside in a downside market and the upside in an upside market) 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

    RHT- good earnings

    SAI- decent earnings

    JPM, USB- closed near highs in banking sector

    AMB- major reversal after its massive share offering; closed near high of day

    MET- strongest stock in insurance sector; closed near high of day

    VPRT- broke out to new intermediate-term high

    SCOR- closed near high of day

    FAF- closed near high of day

    CBG- closed near a high of the day after obtaining financing…stock was up almost 65% yesterday

    CTRN- beat earnings and raised guidance

    CVX- mentioned on “Mad Money” last night, but Cramer noted one should buy it in weakness

    EGO- CEO interviewed on “Mad Money”

    RIMM- upgraded by Goldman Sachs (showed very good strength last night before upgrade was announced…odd)

    BBY- great earnings

    CAG- good earnings

    DPS- good earnings

    GME- good earnings

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

    WX- warned on guidance

    TELOZ- closed near low of day after major reversal

    IPSU- closed near the low of the day

    NBIX- announced phase II results of its 702 Study; report focused on safety rather than efficacy so that is a bit of a warning

    BPL- announced unit offering








    Good luck today.

    Erik R. Kolodny