Before I give my normal synopsys, please read this (from Bloomberg): http://www.bloomberg.com/apps/news?pid=20601103&sid=a8d4mh.dVP_U Basically, there was a major screw-up on the close yesterday- the aforementioned article discussed the NASDAQ, but it seems to extend everywhere. Thus, the closing prints are incorrect on all data feeds this morning street-wide. For instance, Jabil Circuits (JBL) warned on its earnings after the close; all data feeds that I've seen (from Bloomberg terminals on down) show a 'last price' of 3.81 yet the true close was 4.42 on the NYSE. So, if it trades at, say, 4.01 just after the open, it is not 20 cents higher from the 4PM close...it is 40 cents lower. Furthermore, the charts reflect this chaos as well with data extending past 5PM ET. Since yesterday's close, the NASDAQ has changed its data to reflect the 4PM close (but not exactly...it is still a few cents off on most stocks); the NYSE has not. If you want the 4PM close, you can go to your watch list (for Sterling users) and simply enter the symbol followed by a 'dot N' (.N). However, I don't know whether to use the 4PM or the 5PM price because everybody's screens (on the Sterling platform specifically, but likely all platforms) will reflect the 5PM prices. Be aware, however, that it will be very very confusing from the get-go this morning for the entire day trading community for those day traders who rely on closing prices (i.e. the 'unchanged' level) to do trades. My two biggest trades this week utilized the previous day's closing data as a simple for instance so for me anyway, it is a real issue. -------------------------------------------------------------------------------- Yesterday morning, the New York Stock Exchange, the NASDAQ Stock market, and the BATS Exchange sent a joint endorsement note to SEC Chairwoman Mary Schapiro in which they expressed a desire to adopt a âmodified uptick ruleâ and a âcircuit breakerâ in efforts to curb short selling. The old uptick rule only allowed short sales when the last sale price of a stock was a tick higher than the previous price. For instance, for sake of easy argument, if Apple (AAPL) was trading at 101.75 to 102 with the last price of 101.80, one would have to wait until the stock was higher than 101.80 to short it, i.e. if the next price was 101.85, one could then short it. Under the new format, the updated uptick rule would go further- itâd only allow shorting at a price higher than the highest available bid. For instance, in the previous example, same facts- spread is 101.75 to 102 with a last price of 101.80- one could offer 101.76 and get taken- lower than the last sale price, but higher than the bid. Most notably (yet getting no press coverage) is that the application of the rule would occur only after the price of a stock has declined by a significant percentage with the proposal being 10%. The effect of this would be significant in two ways for day traders â particularly if there is no 10% collar. First, letâs make it crystal clear- there would be no more hitting of bids. If, say, Bank of America (BAC) was 10 to 10.04, one could not short the stock at 10; the order would go in at 10.01. Other trades would spring up, i.e. if a 10 reloads, it makes the 10.01 offer easier to take because people would freak out and cancel offers. Second, it is highly likely that thereâd be massive changes at the nations ECNâs. All of the shorting would be done passive, i.e. adding liquidity. So, besides the fact that overall volume will decline markedly as liquidity leaves a bit, the ECNâs would see their revenues subside dramatically. For instance, it costs $3/1000 shares to hit a bid on the NSDQ moniker; so if one went to short 1,000 shares at 10 and got filled at 10.01, not only does the NSDQ ECN lose out on the $3 revenue, they instead pay out at a rate of $2/1000 so youâd receive $5. Thus, the entire rebate structure would change. The net of all of this is that massive change could well come this year once everything passes all of the technological tests so keep your eyes out for the political climate and specifically the updates to this entire topic. Markets were quiet in Asia with Hong Kong the lone exception in finishing of 2% with losses about 0.5% to 1% in Europe overnight. Oil is down a bit, but everything else is quiet. State-side, futures are marginally higher. With no major newsflow and the data screw-up, look for a placid start. There will likely be another attempt to push stocks lower after the profit-taking bout from yesterday yet the volumes in Tuesdayâs session were relatively paltry thus if that volume continues light, the selling will evaporate as the bids come back- particularly as we get toward quarter-end window dressing time. Overall, look for an aimless day with a likely upside bias and a great deal of choppinessâ¦a pretty difficult day to day trade. 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 (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 MCO- continued its recent rally in closing near a high IP- had massive short covering rally; closed near a high PG, MMM, HON- on âMad Moneyâ last night NBY- entered into developmental drug agreement Bad-The following stocks have bad news and/or a weak technical pattern JBL- bad earnings and warned RBN- terrible earnings AMB- massive share offering and warned on outlook JPM, WFC, STT- big banks which all closed near their lows ATHN- closed at low of day and near new trend low NITE- closed near intermediate-term trend low CPF- major reversal; closed near intra-day low DRYS- terrible earnings Earnings: WED MAR 25 BEFORE PTR SOLF WED MAR 25 AFTER PAYX RHT SAI WX Good luck today. Erik R. Kolodny
Thanks a lot! Very helpful! But I still need help understanding this whole modified uptick rule thing... Anybody cares to give a bit more detailed explanations? --------------------- Yesterday morning, the New York Stock Exchange, the NASDAQ Stock market, and the BATS Exchange sent a joint endorsement note to SEC Chairwoman Mary Schapiro in which they expressed a desire to adopt a âmodified uptick ruleâ and a âcircuit breakerâ in efforts to curb short selling. The old uptick rule only allowed short sales when the last sale price of a stock was a tick higher than the previous price. For instance, for sake of easy argument, if Apple (AAPL) was trading at 101.75 to 102 with the last price of 101.80, one would have to wait until the stock was higher than 101.80 to short it, i.e. if the next price was 101.85, one could then short it. Under the new format, the updated uptick rule would go further- itâd only allow shorting at a price higher than the highest available bid. For instance, in the previous example, same facts- spread is 101.75 to 102 with a last price of 101.80- one could offer 101.76 and get taken- lower than the last sale price, but higher than the bid. Most notably (yet getting no press coverage) is that the application of the rule would occur only after the price of a stock has declined by a significant percentage with the proposal being 10%. The effect of this would be significant in two ways for day traders â particularly if there is no 10% collar. First, letâs make it crystal clear- there would be no more hitting of bids. If, say, Bank of America (BAC) was 10 to 10.04, one could not short the stock at 10; the order would go in at 10.01. Other trades would spring up, i.e. if a 10 reloads, it makes the 10.01 offer easier to take because people would freak out and cancel offers. Second, it is highly likely that thereâd be massive changes at the nations ECNâs. All of the shorting would be done passive, i.e. adding liquidity. So, besides the fact that overall volume will decline markedly as liquidity leaves a bit, the ECNâs would see their revenues subside dramatically. For instance, it costs $3/1000 shares to hit a bid on the NSDQ moniker; so if one went to short 1,000 shares at 10 and got filled at 10.01, not only does the NSDQ ECN lose out on the $3 revenue, they instead pay out at a rate of $2/1000 so youâd receive $5. Thus, the entire rebate structure would change. The net of all of this is that massive change could well come this year once everything passes all of the technological tests so keep your eyes out for the political climate and specifically the updates to this entire topic.
I am not sure how much more detailed I could have been in my summary from providing examples to explaining how it could affect the ECN's. I certainly tried and apologize if I was not clear enough in my piece...which I obviously was not. In any case, here is the joint proposal letter from the exchanges...the paragraph which will likely help you the most is found in the middle of the 2nd page starting with "The Commission can." I hope it helps and wish you luck: http://www.batstrading.com/JointShortSaleLetter