MON. SEP. 13- Trading Appropriately In The Immediate-Term In this relatively slow intra-day trading environment, many people are sorely tempted to trade with more size to make up for the lack of movement. When things are moving, one can obviously trade their normal share size to capture profits on their target moves. The problem with the slow(er) tape, speaking for me alone, is that the moves which Iâve become accustomed to garnering over periods of seconds now occur over periods of minutes. Yet, what I and many other people continue to do is act as if rapid profits are attainable (which, in some cases, they are). Thus, I for instance can be right about a moveâ¦but it may take 15 minutes and 36 seconds rather than 1 minute and 36 seconds. Furthermore, as time horizons for moves become a bit less compressed, there is a lot more jiggling in prices within the grander movement. What this has led to for many traders (including myself) is an attempt to break the stasis by trading a few more shares than normal in any given trade. The issue is that by trading in an immediate-term mindset with lower liquidity and smaller deltas, one almost guarantees oneself small losses over time by forcing oneself to exit in illiquid conditions when wrong. Thus, if youâre attempting to trade for immediate-term moves, this is not a time to boost trading size; rather the opposite is true in capital preservation mode. Stocks rose throughout the world overnight with Tokyo ahead 0.9% and Hong Kong up 1.9%. In Europe, the bourses are all up about 1%. The dollar is slightly weaker across the board, gold is flat, bonds down slightly, and oil up almost 1%. There were three main stories overnight. Chinaâs industrial output numbers came in much better than expected, there were a couple of positive economic numbers in Europe, and there was finalization on Basel rules for banking regulation. Futures are up sharply state-side. The only economic data out today is the Treasury budget (forecasted -$95 Billion) at 2PM ET but that is usually not a market mover. Earnings flow is nonexistent. But merger mania is back in style a bit this morning. For the day, look for some giveback of the gains but a positive day once again on a bit heavier volume as the crowd seems finally ready to start anew. Focus on the merger stocks, the bevy of small biotech stocks in the news, and relative weakness plays (particularly early on). Reiterating- 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 specified. If 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 BDCO- closed near a high after LNG received approval to export liquefied natural gas DIN- closed near a high KV/A- closed near a high after receiving FDA approval to bring its 1st product to market RIG- closed near a high after a report from FBR Capital which indicated RIGâs Macondo liability may be lower than expected LULU- closed near a high after posting good earnings MA- closed near a high AMZN- closed near a high CMTL- closed near a high CGNX- featured on âMad Moneyâ on Friday night DTG- HTZ raised its bid for the company to $50/share ARST- received $43.50/share takeover bid from HPQ SNTS- added two drug candidates to pipeline INO- achieved successful phase I completion of its VGX-3100 OXGN- positive Zybrestat study results ARIA- announced phase II initiation of Ponatinib trial AONE- featured on CNBCâs âSquawk Boxâ show this morning after opening the largest lithium ion automotive battery manufacturing plant in North America Bad-The following stocks have bad news and/or a weak technical pattern PCG- closed near a low after a gas-line explosion in San Francisco RDCM- closed near a low WHR- closed near a low SCOK- closed near a low AVGO- closed near a low PCX- warned on 3rd quarter sales volume SGEN- negative phase IIb Lintuzumab results Earnings: None today Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President Joseph R. McCandless- Managing Partner D. Timothy Seaquist- Managing Partner
As I discuss in my firm's chat room daily, I've dabbled a bit re scale. For instance, yesterday, I bought 1/2 my position in PCG through unchanged at 10:02AM ET as there was no follow-through selling from Friday on their natural gas explosion. When it got positive, I bought the other 1/2 just above unchanged. With this said, my focus quite honestly (for myself much less what I see unbiasedly when I am not in positions) is that there is a vast amount of noise particularly with the markets not racing higher or lower and with the low volume at that. So, the moves aren't as 'clean' these days which is why I for one am trying to adapt by holding at least 1/2 of any given position a bit longer than I would have, say, a year ago.
Tuesday, September 14, 2010 TUES. SEP. 14- Basel Is Not A Spice A term tossed around yesterday was âBasel III.â It was arguably the number one influential factor with regard to yesterdayâs stock market action yet most traders (including myself) could not give a coherent explanation of exactly what it was. It all started in 1988 in Basel, Switzerland when a group of central bankers published a set of minimal capital requirements for banks. The requirements were cemented by the G-10 nations in 1992. Basel II in 2004 updated all of this in an attempt to create a worldwide benchmark which banking regulators could use when creating regulations much less the amount of capital needed to safeguard the many varied risks that banks encounter. Fast forward to the present. Basel III is an attempt to shore up some of the concepts from Basel II in particular with tighter definitions of capital requirements, conduits to attempt to limit counterparty credit risk, and a provision for non-subjective liquidity ratios. Basel III will specifically require banks to hold high-quality capital totaling at least 7% of their risk-bearing assets. It is a gigantic rise over the current 2% but is much lower than what banks were worried about; it also has a phase-in algorithm extending to January 2019 or later. The net of all of this is that most big banks worldwide fit the criteria already. Thus, the market initially rallied yesterday because the fears of an overhang, i.e. banks being forced to sell shares of stock to raise capital, were dissolved. There was also a sigh of relief that most banks are OK and that there werenât any surprises. However, the market drifted lower yesterday in the afternoon because a lot of this was somewhat expected plus it makes one wonder where exactly the limbo bar has been placed here. If all that was required to be a major league baseball player was the ability to swing a baseball bat, I am guessing many more of us would be major league baseball players. That said, the thought that banks are being given a green light to make more loans is of course a good thing overall. So, in a nutshell, this seems to be a one-day event as there is a slew of economic news out this week domesticallyâ¦but it was a pretty major market-influencing event to be sure yesterday. Markets were quiet overnight with Tokyo down 0.2% and Hong Kong ahead 0.2%. The action in Europe is quite similar with every major bourse within a whisker of unchanged. Retail sales data came out slightly stronger than expected this morning which gave a brief lift to futures. Gold is notably stronger to the tune of 1% with the dollar slightly weaker across the board. Business inventories (0.8%) are out at 10AM. Look for a quiet day with prices not straying too far from yesterdayâs levels. The bias seems to be a tinge lower with the dollar falling a bit. Focus on the earnings plays and retailers such as BBY, the small cap biotechs in the news, and the stocks that closed near their highs yesterday for potential short covering this morning. Reiterating- 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 specified. If 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 ZUMZ- decent earnings guidance GS- closed near a high DTG- closed near a high after receiving a $50/share bid from HTZ DIN- closed near a high LULU- closed near a high on continued earnings momentum from Friday JKS- closed near a high CDII- received major contract from Beijing Tianrum Construction JNY- closed near a high CIE- closed near a high GGC- closed near a high PTC- closed near a high ULTA- closed near a high RVBD- closed near a high MMYT- closed near a high QLIK- closed near a high XNPT- closed near a high IRWD, FRX- positive phase 3 Linaclotide results BBY- great earnings CBRL- decent earnings Bad-The following stocks have bad news and/or a weak technical pattern POWI- cut revenue guidance LH- closed near a low after acquiring Genzyme Genetics from GENZ, but it will be dilutive to earnings DYP- closed near a low after their auditing firm was changed; also, there was an exodus of executives and directors INET- closed near a low VOLC- notes offering FUL- poor earnings DGI- cut earnings guidance GMCR- acquiring Van Houtte; sees deal Earnings: TUES SEP 14 BEFORE BBY CBRL KR TUES SEP 14 AFTER PLL Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President Joseph R. McCandless- Managing Partner D. Timothy Seaquist- Managing Partner
WED. SEP. 15- Moving In Bunches The S&P 500 has been up 9 of the last 10 trading days. Before that, it was down 7 of the previous 9 trading days. Before that, it was up five days in a row. In months much less years past, prices would obviously have strong mini-trends within a trading range over a series of days, but to the degree to which this occurs now. There are several reasons for this. First, the newsflow within the channels is particularly in focus. Whether it be worries over the poorer nations of Europe to optimism about the prospects for the domestic jobs market, notable news is having an impact that can last for days. Second, volume- or lack thereof. It is much easier for prices to be pushed up or down when there are fewer participants and itâs so easy for trends to be exacerbated when someone is stuck badly in a wrong position because their exiting further impacts the situation. Third, the advent of entities such as hedge funds take huge positions which can cause enormous trend moves. Witness yesterday when the dollar touched a multi-year low against the yen while gold soared 1.5% as a fine example. As day traders, itâs not up to us to truly question this activity but to go with it. On days like yesterday, the forces of positive comments from the likes of Suntrust (STI) can combat an earnings warning from steel entity Nucor (NUE) when the market has risen for several days. Thus, obviously be ready to change with the trend if the trend changes. But donât anticipate it changing. If you are doing immediate-term trading rather than longer-run stuff, this is certainly an era where it is much better to be reactive rather than proactive (as long as you don't chase moves while 'reacting'). Markets in Asia were up overnight with Hong Kong slightly up by 0.1% but Tokyo rallied 2.3%. The Japanese government stepped in to try to stem the rise of the yen which sparked some short covering in the stock market there. Prices are slightly weaker in Europe by about 0.3% average for the bourses with the leading trigger seeming to be a disappointing jobless claims number out of Britain. New York Fed data was slightly disappointing at 8:30AM although Export/Import Prices came in as expected. Industrial production gains of 0.3% are seen at 9:15AM along with a Capacity utilization of 75.0; crude inventories are due out at 10:30AM. Gold is slightly lower with oil down 1%. Bonds are weaker with the dollar surging against the yen by 2 ½ yen although flat against the euro. Futures are down amidst all of this murkiness along with a host of earnings warnings from smaller companies. Look for a choppy day similar to yesterday but with a bit of a downside bias. Trading-wise, focus on the earnings warnings, the companies with news out last night (buybacks, media, and such) and the small-caps which closed near their highs yesterday. Reiterating- 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 specified. If 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 CREE- closed near a high NUVA- closed near a high after releasing earnings RDWR- closed near a high amid rumors of an imminent deal GOK- closed near a high BPI- closed near a high AUMN- closed near a high after announcing an expansion of its gold drilling program THOR- closed near a high SVNT- received FDA approval of its gout drug AAPL- featured on âMad Moneyâ last night PLKL- decent earnings MA- announced up to $1 billion buyback of shares Bad-The following stocks have bad news and/or a weak technical pattern NBIX- disappointing top-line results of CRF1 to treat depression STLD- earnings warning CLF- closed near a low after updating its 2010 North American coal outlook ARNA- closed near a low after negative FDA comments released about the companyâs diet pill LLEN- closed near a low MDAS- closed near a low after announcing an $850 million acquisition NOVL- rumors that the company has reached a deal to sell itself in two parts Earnings: WED SEP 15 BEFORE None today WED SEP 15 AFTER AIR DBRN Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President Joseph R. McCandless- Managing Partner D. Timothy Seaquist- Managing Partner
THURS. SEP. 16- Saving The Yen? For seemingly day after day in this space, I have made reference to the dollar declining to a multi-year low against the yen. Well that certainly changed dramatically yesterday. The Japanese government made a huge (solo) attempt to halt the advance of the yen which has impaired the earnings of exporters. They did this in promptly smashing a six-year plus time spate of not intervening in the currency market as the yen traded to its highest relative point in 15 years on Tuesday. It is very hard to imagine that a singular (rather bold) move by the Japanese government will work. If someone drops a ball from 20 feet high, when the ball hits the ground, itâs going to bounce (just not as high as the 20 foot level from which it was dropped) but the force of gravity will force it to settle on the ground over time. The only way the bounce can be sustained is if say, there was someone on the ground to catch it and throw it back up. Itâs the same thing here. It is up to Prime Minister Kan to do things like nag at the Japanese Central Bank (JCB) to the central bank to increase bond purchases, grow an in-place bank-loan package, and/or put pressure on the JCB to lower interest rates. The Bank of Japan seemed to be on the same page in releasing complimentary statements about the move as they want clearly to do what they can to stimulate economic growth so as to offset risking a long period of deflation. I do not know nearly enough about the situation to even hazard a guess as to what will happen nor is this the place to pontificate on the intelligence of government intervention in such a tough situation. I just bring all of this up because it had a dramatic impact on the yen in the worldâs currency exchange yesterday. Furthermore, all of this may well affect equities in time as many hedge funds were caught short the yen while on a macro level, itâs a very good immediate-term test to see exactly how strong the yen (and the markets) really are- and with it potentially the strength of the global economy. Markets overnight were generally slightly lower overnight with prices ranging from unchanged to down about 0.3% on the Asian markets and European bourses. Oil is down 1%, gold up another 0.5% with currencies and bonds flat. Futures are down slightly on the heels of a weak UK jobless claims number with PPI and jobless claims domestically in-line with estimates. Phily Fed is out at 10AM with an estimate of 0.0. Ahead of options expiration tomorrow, it looks like another quiet and choppy day. The bias right now is to the downside, but there are many things in the green so look for a truly stock traderâs day with lots of individual moves. Focus on the companies with earnings such as FDX, the myriad of stocks in the news (share offerings, acquisitions, et al), and any A-B-A2 to the upside in any stock with positive news in this short covering environment. Reiterating- 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 specified. If 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 DBRN- decent earnings AIR- decent earnings GME- stock and debt buyback SVNT- closed near a high after the FDA approved its gout drug AAPL- closed near a high SPN, DVR- closed near a high after the Interior Department intimated that several oil wells in the Gulf of Mexico must be plugged TNDM- closed near a high HOG- closed near a high amid vague takeover rumors MCK- closed near a high amid takeover rumors AUMN- closed near a high CO- closed near a high after announcing a stock buyback GOK- closed near a high LPNT- closed near a high on takeover speculation OPNT- closed near a high FUQI- closed near a high after a showing at a Chinese jewelry fair PIR- decent earnings BCRX- positive phase 2 results from BCX4208 Bad-The following stocks have bad news and/or a weak technical pattern NPSP- share offering AEL- notes offering MSB- closed near a low PWER- closed near a low after rival SMA Solar warned of margin pressure FDX- poor earnings guidance CFN- 30 million share block sold by CAH at 23.47 Earnings: THURS SEP 16 BEFORE FDX PIR THURS SEP 16 AFTER ORCL RIMM Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President Joseph R. McCandless- Managing Partner D. Timothy Seaquist- Managing Partner
FRI. SEP. 17- Atoning- Redux I am not going to be in the office tomorrow. However, the blog post I wrote last year (one of the hardest and most introspective which for me made it one of the best in my eyesâ¦and something I will update in due time) is particularly apt. So, forgive me for the re-post, but if I am going to repeat myself, this is the one to do it with. From Sep. 28, 2009: Today is Yom Kippur. For Jews, it is a very solemn day and is in fact nicknamed âThe Day of Atonement.â For the stock market, it is usually a very slow day as many traders- Jewish and non-Jewish alike take all or part of the day off. Newsflow slows to a crawl usually and liquidity is at a premium. So, in line with the personal hefty matters Iâll be thinking of in synagogue later this morning, Iâm going to switch things up. There is an absolutely beautiful prayer/song Iâll be reciting later called the Ashamnu (you can listen to it on You Tube, I am sure). In the prayer, there is a list of many of the general sins weâve committed over the year (gossiping, hitting, jeering, mocking, and so forth). As we say the Hebrew words for the sins, we make a general ball with our left fist and touch our heart as a âshame on meâ theme along with a quest for forgiveness. In line with this, here is a short list of trading sins we have all been guilty of (certainly ones Iâve been guilty off at times in the last 12 months) which have caused me to lose money. I encourage each of you to read it, add to it, note themâ¦and of course ask for forgiveness from the Trading G-d! Or of course, simply make an internal plea to be better about it in the next 12 monthsâ¦and keep in mind, I have lost at least $1,000 over the course of the last year committing each of these sins (and much more in some cases): 1. I have scalped unnecessarily at times I should not have. 2. I have been overly exuberant when having a winning trade and overly depressed when having a losing trade. 3. I have let other things on my mind get in the way of my trading. 4. I have traded from fear when I should have put on bigger size in a trade. 5. I have traded from greed when putting on too much of a size in a trade in which I should not have done so. 6. I have not gotten out in the ½, ¼, ¼ method when right. 7. I have hoped for better results when wrong in a trade and held on too long. 8. I have traded a stock on momentum when there was no reason to do. 9. I have traded counter to the market. 10. I have traded illiquid stocks. 11. I have occasionally traded a stock in the middle of the range. 12. I have traded a stock without stagnation. 13. I have traded a stock in which I thought I could make, say 10 cents on 10,000 shares and promptly lost three days of work 14. I have, when doing poorly traded without seeking confirmation and lost money. 15. I have been frustrated when trying to short stocks that cannot be borrowed. 16. I have exited a stock when there was literally no reason to do so. 17. I have entered a stock when there was literally no reason to do so. 18. I have let go of my beliefs as to what I think would happen to go with the crowd. And here is a list of things I vowed last year I would not doâ¦and have kept my vow for the last 12 months. 1. I have never not one time called out how much money I made in a stock the instant I exited a trade nor have I even clapped my hands and exclaimed how well I did when right. It is obnoxious boorish behavior and impresses nobody when done over time. I did it for the last time ever 1 ½ years ago and saw a look of genuine jealousy and anger from a good friend of mine and hated myself instantaneously. Reputations speak for themselves. 2. I have never come in late to work on my own volition outside of traffic accidents or other external factors. 3. I have never left work earlier than I had to. I actually hate this one because there are things Iâd rather do than play a computer game all day long. But, I have to pay my mortgage. 4. When exiting stocks properly, I have held on to my winners longer than I ever have on average this past year. 5. I have adjusted my schedule to come in even earlier during earnings season to allow for even extra time. Getting up at 4:30AM instead of 5:30AM to make extra income when it needs to happen for added income is not a big deal. 6. I accepted the market for what it was. As the roaring bull market of 2009 commenced in March, I did not disbelieve it; I just went with what was in front of me. 7. Whenever I really need a break- due to exhaustion or trading-related strings of winning or losing which affected my emotions- Iâve taken a quick walk rather than forcing things. 8. I can look in a mirror and say I made my best effort amidst a time constraint in trying to help anybody I could in terms of things like configuring software for themâ¦although I know I can always do more. 9. I have gone stretches of as long as four hours intra-day without making a tradeâ¦and not felt like I needed to press buttons. In the Jewish faith, the symbol for the number â18â is the same as the Hebrew word âlife.â So, I aptly named 18 sins and made a list of only ½ along in the spirit of genuine humility as to things Iâve been good about. Unfortunately, I could keep going on the list of trading sinsâ¦and have to really think about the vows Iâve kept successfully to add to that. But, all I can do is vow to myself and to each of you that Iâll try and do better in the next 12 months. As of this writing, futures are nicely ahead on positive earnings strength from things like ORCL and RIMM. With it an options expiration day, look for a very active open and close and a somewhat dull middle five hours. The bias should remain to the upside barring something major out overnight. The focus will be on the techs because of the earnings from RIMM and ORCL, the biotechs with news such as ALKS and ARNA, and a myriad of smaller stocks that closed at or near highs today which closed up sharply on continued exaggerated moves tomorrow. Reiterating- 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 specified. If 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 ALKS- FDA announced approval for Vivtrol for Opioid dependence RIMM- decent earnings with good earnings guidance, but did warn of margin pressures ORCL- great earnings TXN- boosted dividend and stock buyback AAPL- closed on a high FSLR- closed near a high AUMN- closed near a high CF- closed near a high AMZN- closed near a high DARA- closed near a high SINA- closed near a high FN- closed near a high Bad-The following stocks have bad news and/or a weak technical pattern ARNA- FDA rejected its Lorcaserin product MEE- forecasted weaker operating results CHSI- closed near a low PWER- closed near a low Earnings: None today Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President Joseph R. McCandless- Managing Partner D. Timothy Seaquist- Managing Partner
MON. SEP. 20- Doing What The Market Says To Do A rather long time ago, a friend of mine (not me, I promise) who is otherwise uber-intelligent did something pretty stupid. He went to the barbershop for a haircut as his hair was slightly long. When the barber asked him if everything was as he liked it, he asked for a little more to be cut in the back and the front. The request was granted. Now he felt it was slightly even. So more came off. Before he knew it, he was almost totally bald. There are distinct times that doing absolutely nothing and taking the hand one is dealt is absolute right thing to do. By simply not being a perfectionist, my friend would have had (almost exactly) the haircut he wanted. The same is true in the day trading arena. I had to miss the start of trading on Friday due to circumstances way beyond my control. When I looked back, I noted that the Dow fell almost 100 points in mere minutes just after the bell- an otherwise wonderful opportunity. As frustrating as that was (and it was very frustrating), when I commenced trading around 1PM, the pace had slowed for the day. In fact, from 1PM-4PM, the NASDAQ traded in a range of eight points. You know what I did? Very little. I traded less than 10,000 shares and walked away $100 richer. What took me many years to understand is that when the markets are good, one has to go full throttle. When the market is slow- no matter oneâs personal circumstances- one has to go much slower. It is that type of environment where many people get into trouble because they churn themselves up in taking many small losses and leave the trading desk poorer and angry. Basically, itâs the good trading markets/years that can make people a terrific livingâ¦it is the stasis type of environment that knocks most traders out of the game. Markets in Asia were quiet overnight with Tokyo closed and Hong Kong ostensibly unchanged. Markets in Europe are stronger overall with the DAX up 1.1% and the FTSE up 0.7%. Oil is up slightly, gold another ½%, and the dollars and bonds are quiet. Futures are nicely ahead on continued optimism over recent economic numbers as well as a mini-merger Monday. The NAHB market index is out at 10AM with an expectation of 13. President Obama has an hour forum on CNBC today at 12PM. Thus, look for a quiet day with a modest upside bias. The focus will likely be on small biotechs in the news, the various stocks being acquired or rumored to be acquired, and the relative strength plays (particularly stocks which closed near their highs on Friday). Reiterating- 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 specified. If 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 SFUN- wonderful IPO; closed near a high SFSF- closed near a high LOPE- closed near a high NTGR- closed near a high PEGA- closed near a high FTNT- closed near a high GSM- closed near a high after posting earnings JOBS- closed near a high MSPD- closed near a high CO- closed near a high THO- closed near a high after announced an acquisition of Heartland Partners CHTP- positive phase III Northera trial results showing benefits for hypotension ID- Safran bid $12/ share cash for the company NZ- IBM bid $27/share for the company DFS- decent earnings LEN- decent earnings Bad-The following stocks have bad news and/or a weak technical pattern MEE- closed near a low after warning of a slower outlook CLF- closed near a low ARNA- closed near a low after the FDA rejected its lead drug JPM- closed near a low PSBH- closed near a low Earnings: MON SEP 20 BEFORE DFS LEN MON SEP 20 AFTER None today Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President Joseph R. McCandless- Managing Partner D. Timothy Seaquist- Managing Partner
TUES. SEP. 21- Overdone? No Such Thing. I lived in Chicago for a number of years. Although I was never a Chicago Bulls fan, I always respected the fact that they were ridiculously good at the height of their best years in the late 1990âs. One year, they won something like 72 regular season games out of 82 played. By the same token, the 1998-2000 New York Yankees were very impressive as well with the 1998 team winning a then AL- record 114 regular season games. But hereâs the thing- both the Bulls and Yankees did indeed win championships in their respective leagues the year that they had those monster seasons. But it did not preclude them from winning two more championships in each case. People did not wait around and wonder when itâd end. Instead, fans of both teams and both sports appreciated the great teams for what they were and expected them to win rather than lose. So why is it then that it is the polar opposite when it comes to the stock market? I mean, I get it to a degree- when you have Michael Jordan at the prime of his career, youâre less likely to worry about the Bulls going into the tank than you are when it comes to wondering if spiraling debt can take the stock market down. But really. There is no such thing as âoverboughtâ or âoversold.â Just as great teams in certain times find a way to keep winning, so does the stock market. Indeed there are many reasons for the market to go up right now these last few days with one of the most glaring being that âthe 2010 money chaseâ may well be on. Basically, the fiscal year for mutual funds ends on October 31 and many jobs are on the line so performance can beget performance. But the bottom line is that there is no such thing as âoverboughtâ or âoversoldâ when doing intra-day trading. Seemingly extended moves can always get more extended and indeed in phases like the one the market has been in for the last few days, the disbelievers tend to miss out- or worse yet- lose a lot of money. Markets overnight were mixed in Asia with Tokyo down 0.3% but Hong Kong up 0.2%. In Europe, prices are a bit higher with 0.3% gains in London and 0.4% and Frankfurt. Currencies and bonds are quiet. Gold is down slightly, but oil is notably weaker by about 1%. Futures are slightly weaker early on. Housing starts (550K estimate) and Building Permits (560K estimate) are due out at 8:30AM. For the day, itâll likely be quiet with a downside bias based on the fact that a lot of the recent leaders are ticking slightly lower. Sounds strange, but every morning recently (the last seven mornings), theyâve been higher. The FOMC rate decision meeting results at 2:15PM will rule the day with prices likely remaining in a tight range within that downside bias. Focus on all of the recent momentum leaders for A-B-A2s, the few companies that reported earnings today, and big cap techs and financials (particularly after 2:15PM today). Reiterating- 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 specified. If 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 AAPL- closed near a high (at a new all-time high) VHC- closed near a high ROVI- closed near a high after signing a contract with AAPL OSBC- closed near a high MMR- closed near a high after getting a further capital infusion from FCX as well as acquiring assets from PXP BIDU- closed near a high MA- closed on a high WYNN- closed near a high TNAV- signed an agreement with S FTNT, RDWR, NTGR, NICE- mentioned on âMad Moneyâ last night AMSC- closed near a high INFN- closed near a high EBIX- closed near a high VVUS- announced positive top-line results from a two-year study of Qnexa AAWW- great earnings guidance Bad-The following stocks have bad news and/or a weak technical pattern HCN- stock offering HTS- stock offering CYS- stock offering BORN- closed near a low CAG- poor earnings SNDK- downgraded to neutral at Sterne Agee Earnings: TUES SEP 21 BEFORE AZO CAG CCL FDS TUES SEP 21 AFTER ADBE CTAS DRI Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President Joseph R. McCandless- Managing Partner D. Timothy Seaquist- Managing Partner
WED. SEP. 22- Scale Of Price For those who remember, one of the main lighter topics of conversation following the exile of the Marcos family from the Philippines was the excess of handbags and shoes that Imelda Marcos possessed. I am not sure if there is a precise estimate anywhere, but most reports indicate that Ms. Marcos possessed approximately 1,000 handbags and 3,000 pairs of shoes. The love of shoes in particular by Ms. Marcos was widely panned by the likes of icon Johnny Carson and many other late night comics. The much more serious side to this is that countless Filipinos were starving as Marcos collected her shoe collection. I bring all of this up because of a lesson that we utilized in a middle school math class. If a destitute women living in the Philippines had but one ratty handbag but was given a new bag, sheâd go from possessing one to two handbags (100% gain). Conversely, if an individual later indicted on corruption charges had 500 handbags and acquired another 500 handbags to now own 1,000, well, that too is a 100% gain. In the midst of the recent stock market rally, this very principle has come into pay with the likes of triple digit stocks such as AAPL, AMZN, GOOG, and NFLX. Using the example of AAPL, people are amazed at how, for example, the stock rallied from 269.50 to 287.35 over a few days. Well, would anybody be paying quite as much attention if AAPL rallied from 26.95 to 28.74? No- even though it is the exact same percentage move! Thus, as we continue to trade in what has been a hot market recently, donât let the scale of price skew your decisions on either the buy or the sell side. Markets were mixed in Asia overnight with Hong Kong up 0.2% and Tokyo down 0.4%. The tone was decidedly more negative in Europe with Frankfurt off 0.7% and London down 0.5%. The reaction overseas to the Fed announcement has been negative overall in-line with the reversal yesterday domestically. Initially, it was viewed as positive that the fed basically stands ready to do what it takesâ¦but then the prevailing thought became âwhy are they so eager to be so ready?â The dollar declined yesterday afternoon and is down a little more today. Gold is continuing to mushroom in challenging $1,300/oz now. Oil too is up about ½%. Bonds soared yesterday and are up slightly again this morning. The only economic news is the weekly crude inventories report at 10:30AM. Futures are down a bit after trading nicely higher overnight. Look for a downside day overall with an attempt to rally just after the bell. The upside will likely be capped by the fears of what is out there but the downside limited as well as a number of money managers stand ready to do some window dressing into the end of the quarter after the recent run-up. Focus on relative strength plays particularly early in the day, big cap techs and financials, and the stronger earnings plays for some action. Reiterating- 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 specified. If 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 CTAS- decent earnings PWER- announced stock buyback ALOG- good earnings RIMM- closed near a high BIOF- closed near a high on hopes of an approval by the EPA of its E15 SCOR- closed near a high TTPA- closed near a high on takeover speculation CLGX, PLL- featured on âMad Moneyâ last night OGXI- positive Custirsen phase II trial KMX- decent earnings SEED- reached an agreement with the Chinese Academy of Agricultural Sciences re its BT gene Bad-The following stocks have bad news and/or a weak technical pattern ADBE- terrible earnings PMCS- warned on earnings guidance DRI- poor earnings AMAG- closed near a low after pulling out of an investment conference CHBT- closed near a low after a brokerage downgrade FUR- share offering BIIB- indicated there is a need for safety monitoring for Gilenya Earnings: WED SEP 22 BEFORE GIS JEF KMX WED SEP 22 AFTER BBBY RHT Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President Joseph R. McCandless- Managing Partner D. Timothy Seaquist- Managing Partner