THURS. SEP. 23- Voicing Thoughts One of the very unique features at the place where I am fortunate enough to be a trader and a managing partner (Epiphany Trading, LLC) is that we actively seek to foster a feeling of community. When we first formed our firm, we all agreed weâd have a chat room, a microphone, and call out all our trades with as much notice as possible before we did them in utilizing our technology and attempting to aid our traders (since we are all traders ourselves). We quadruple check each other daily. We also have pleaded from day one for all traders to call out their ideas/thoughts so we could all give feedback. I should take a step back. I once worked at a place where Iâd good naturedly say âIâm looking to buy IBM at 100 if it gets thereâ as a for instance, when it was trading 99.95. One of the traders in my office would buy 95,96,97,98,99, wait for me to say in, others to clamor, and sell unsuspectingly to us. When his actions were discovered, he was quickly ostracized and was out of the business within weeks. But it left a lasting impression on me to do the absolute opposite if I was ever in a position to do so and found some great business partners who agreed. It is from this premise that one of the cornerstones of the firm was formed. Along the same vein, we try to foster a very positive atmosphere. Donât get me wrong- every trader- certainly myself included- is guilty of ânegative energyâ behaviors. But yesterday alone, in my office, I heard the following comments: âWow. That was the first profitable trade Iâve had all day,â âmy broker is horrible,â âthis system sucks,â and âI have to be the unluckiest person ever.â As just noted, we are all capable of negative behaviors- myself at the top of my list. The trick is to watch yourself (something, speaking for me, Iâve gotten better at over the years but can certainly improve as well) For instance, yesterday after missing two trades which would have been quite fruitful (like mid four figure monetarily fruitful), I said I needed a walk so that anyone asking where I was would know, got up, and left for a few minutes. I did not throw my mouse, curse, blame anyone or anything, nor note out loud that I missed out on two opportunities to make what would have been several thousand dollars in profits. The walk helped me, I came back, and put together at least a decent day. The two bottom lines are as follows. First, we have a pretty unique thing going on here; in general, inexperienced traders who keep all of their thoughts to themselves tend to lose because how can anybody more experienced offer feedback since nobody is a mind reader? Second, everyone has their own issues. But negative thoughts/comments can only hurt oneâs tradingâ¦as well as affect everyone else in a confined space. Asian markets were closed overnight for various autumnal holidays. However, the European bourses were all hit fairly hard overnight on a report indicating slowing economic activity among the 16 euro nations. Most bourses are now down just over 1%. Oil is down over 1%, gold flat, the dollar is lightly mixed, and bonds are up a little. Jobless claims data came in poor. Existing home sales (4.04 million units) and the LEI (0.1% gain) are expected at 10AM. Futures in this mixture are getting hit rather sharply. Look for the losses to be maintained, but in a choppy range from the open with the wildcards being the economic reports and if the dollar or gold spiral- all of which is somewhat unlikely. Focus on select retailers off of BBBYâs earnings strength, big cap tech after its huge run, monitor any weakness in financials, and particularly note any relative strength plays particularly if the market holds after the 10AM reports. 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 BBBY- good earnings RHT- good earnings DIN- decent earnings guidance NFLX- closed near a high at a new all-time high AAPL- closed near a high at a new all-time high NFG- closed near a high after announcing positive Marcellus shale well results and exploration of joint-venture opportunities TTPA- closed near a high on takeover speculation SVNT- closed near a high on takeover speculation LVS- closed on a high KMX- closed near a high after posting good earnings SAY- closed near a high after announcing it will report earnings this month EW- new study data indicated patients using EWâs replacement heart valves delivered by catheter had a higher survival rate than those patients who maintained their original valves TESS- rumors of an acquisition pushed the stock up after-hours SCHL- decent earnings Bad-The following stocks have bad news and/or a weak technical pattern BMR- share offering CPRT- poor earnings CHSI- closed near a low amid a contract dispute with a major client GS- closed near a low SEED- near island reversal in closing near a low after announcing a deal with a Chinese agency BIIB- closed near a low amid safety concerns about one of its drugs RBCN- closed near a low MKSI- closed near a low AEIS- closed near a low STRI- closed near a low SKX- closed near a low VRTX- debt offering Earnings: THURS SEP 23 BEFORE RAD SCHL TXI THURS SEP 23 AFTER CMTL FINL NKE TIBX 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. 24- Profiting From A Block Sale There was a rather interesting trade which developed early Thursday morning last week before the NYSE open and continued to build on itself just after the NYSE commenced trading. Overnight, Cardinal Health (CAH) announced it was selling its entire 30 million share stake in CareFusion (CFN) at a price of 23.47 to Morgan Stanley. When seeing that headline, the first thought of many traders isâ why is CAH selling its stake in the company?â However, the correct question to ask is âWhy was Morgan Stanley buying it and what do they look to do with their $700 million stake in the company? The answer is simple for the immediate-term: buy more. Why is this? They now own a lot of shares and want to unload them so the best way they can do it is to create a picture of strength. Furthermore, if there is no major news, the overhang of a gigantic seller now leaving is quite bullish because the selling pressure is lessened. Thus Morgan has every incentive with the wind at its back at that for the stock to go north. This is why although it traded down to below 23.50 in the pre-hours, it was 24.20 by 9:30AM ET and almost 24.50 at the high of the day. From here, a day trader should note two things. First, with a high of 24.47, there will likely be a short covering pop above 24.47. Conversely, should the stock get to 23.47, Morgan Stanley has a problem on their hands as they drew a major line in the sand there so itâd likely be a short just below that level. The bottom line is not to ask âwhy,â but rather âwhat will happen nextâ when confronting a situation such as this one. Markets in Asia were mixed overnight with Tokyo down 1% but Hong Kong up 0.3%. In Europe, markets were down overnight off of Wall Streetâs weakness yesterday but have crept back up to trade slightly in the green. Gold has now breached the $1,300/ounce level. Oil is up over 1%. The dollar is a tinge lower against the yen, but sharply lower against the euro which is now quietly approaching the 1.35 level to the dollar. Durable goods came in better than expected this morning with new Home Sales (290K expected) data out at 10AM. Futures are sharply higher in recouping all of yesterdayâs losses and more with fund manager David Tepper on CNBC declaring he was very bullish. Thereâs no reason for the party to stop as we approach quarterâs end so look for the gains to hold in a narrow range as many traders will likely leave a little early on an incredibly warm New York afternoon. Focus on the microcaps which closed strong yesterday in doing A-B-A2s on short covering, homebuilders off of KBHâs earnings, and any relative weakness play particularly around 10AM should the homes number be bad. 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 NKE- good earnings TIBX- good earnings CMTL- decent earnings; announced stock buyback and cash dividend as well SPWRA- closed near a high MCP- closed near a high CML- closed near a high ROSE- closed near a high REE- closed near a high ENMD- closed near a high FCX, PKI- featured on âMad Moneyâ last night BIDU- closed near a high KBH- decent earnings Bad-The following stocks have bad news and/or a weak technical pattern FINL- terrible earnings VICL- share offering CVVT- closed near a low ALNY- restructuring and cutting work force along with updating its NVS collaboration EDU- warning on earnings guidance PBR- issued 2.29 billion shares at 34.49 Earnings: FRI SEP 24 BEFORE KBH Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President
Hi Erik, first off i want to thank you for your daily overview of the market wich i enojy reading... I discovered your chat room @ epiphany and been using it for a couple of days, sadly, a passed it over to a friend of mine (we both work at swifttrade) and he spammed the channel and got banned, as we work in the same office my IP was banned as well. Can you please remove the ban so i can access the chat again? Of course there wont be any spamming in the future i told him already how it works... Thanks in advance and keep the good work
MON. SEP. 27- Getting Educated About EDU If I had a dollar for every time I heard the words âI wish Iâd have held that much longerâ not only from others but from my own loud mouth, Iâm guessing Iâd have a net worth of $100 million or so. Well, letâs discuss a rather fascinating and unusual thing that happened late last week. On Thursday, shares of New Oriental Education & Technology (EDU), the biggest provider of private educational services in China, closed at an all-time high on the heaviest turnover in two months. In fact, the shares had rallied 14% in the previous week-and-a-half. I showed this chart to a few people when they all walked in the door on Friday morning and they all universally agreed that on a strict technical basis, the action in EDU was pretty darn good with no warning of anything majorly negative. That didnât stop EDU from issuing an announcement at 4AM on Friday morning in which it indicated that student enrollment was sharply below prior guidance. This great acting stock, which closed at an all-time high the day before, cratered in trading down as much as 20% before recovering slightly. Now, if your goal is to swing trade with a time schematic of weeks to months, that is one thing. But if you are aiming to make trades with a time horizon of seconds to minutes, thereâs no point in worrying/thinking about what happens ânext.â Itâs not your game or trading area. Yes, there will be times that I for example will sell the last piece of my position for a net profit of 24 centsâ¦and watch whatever I was in rally over a point in seconds. But a) far more often, I know I can avoid the pitfalls of an EDU by doing what Iâm supposed to do and b) it doesnât matter what happens outside of my game plan. For instance, I am not an EDU analyst thus if I made, say, 75 cents in a trade in 10 minutes and it moves four more points in the next two days, well, I do not aim to begin to guess how an EDU will react longer-term as there are too many factors beyond my control (geopolitics, whatever is going on in China on any given day, the overall market, and so forth). Thus, if youâre a day trader, use this EDU case as but one more example in not worrying about âwhat could have been.â Sometimes, âwhat could have beenâ not only yields poor results, but itâs utterly unpredictableâ¦so why try to predict it if your area of trading specialization is to focus on the immediate-term? Markets in Asia were higher overnight with Tokyo up 1.4% and Hong Kong Kong ahead 1%. The trend continued in Europe although not to the same degree with most bourses up 0.1% to 0.3%. The dollar is marginally weaker with gold and oil both up slightly. Futures too are up a little bit. No economic reports are on the docket. Itâs quiet but impressive that the gains from last week are holding amid a rash of mergers this morning. Look for the gains to resume again today albeit at a slower pace than from Friday. Focus on the myriad of mergers, big cap tech, strong microcap biotech stocks, and relative weakness plays (particularly from about 9:30AM-10AM). 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 HSFT- closed near a high KNXA- closed near a high after a couple of brokerage upgrades LAMR- closed near a high on a brokerage upgrade REE- closed near a high in moving in sympathy with MCP MIPS- closed near a high on a brokerage upgrade AMZN- closed near a new record high BIDU- closed near a new record high CREE- closed near a high GS- closed near a high ROVI- closed near a high IBM- closed near a high QLIK- closed near a high NFG- closed on a high FSLR- closed near a high AGU- closed near a high MCP- closed near a high upon commercial launch of Earth-based water purification technology WYNN, LVS- closed near a high RIMM- closed near a high V- closed near a high STRA- closed near a high GOOG- closed near a high JOYG- closed near a high AXE- closed near a high after declaring a special cash dividend ANF- closed near a high CAVM- closed near a high RRD- closed near a high MCHP- featured on âMad Moneyâ on Friday ACV- to be acquired by Unilever for 37.50/share in cash CALM- good earnings SGEN- positive top-line results from its SGN-35 product AAI- to be acquired by LUV for 3.75/share in cash plus .321 shares of LUV Bad-The following stocks have bad news and/or a weak technical pattern NKE- island reversal in closing near a low despite posting good earnings PEET- closed near a low ISRG- started at âsellâ by Goldman Sachs Earnings: MON SEP 27 BEFORE CALM ZLC MON SEP 27 AFTER JBL PAYX Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President
TUES. SEP. 28- Every Stock Is Different You know how they say that no two snowflakes are alike? Well no two people are alike either (even amongst the identical twins that I know!). My wife for instance absolutely loves skydiving while I have an abject fear of heights if I am not in a confined space. By the same token, she refuses to eat sushi- a cuisine that I love. My mother is an acclaimed calligrapher whereas my penmanship...well, it can use some improving. But I have a head for numbers whereas she despises math. In the same vein, no two stocks are alike. For instance, Citicorp (C) will trade in a very narrow range all day long in high volume spike pockets while a stock like Mastercard (MA) will trade at much higher prices in much lower volume at a much higher spread. More on point, the things in the middle trade differently too. Comparably, Visa (V) will trade in a general correlation with an MA but the individualized movement within the broader trend can be much bigger on a percentage-basis. In comparison to C, Bank of America (BAC) can and will move rapidly to a market event on much lower levels of volume. So the key question to think about is a subtle one- immediate-term time-horizon traders will trade an MA and a V the same way and a C and a BAC exactly the same way. In a word, don't. If trading, say, 10,000 shares of C, why would one trade twice as much of BAC if it's going against them in particular when the BAC delta is much higher than that of C? Now, of course, there can be some good reasons such as one is hoping for a big move with a big position in a relatively big mover. But most traders should never treat the two the same because even if they are in the same sector, they could still have different news (maybe C is downgraded and BAC is upgraded by a brokerage house). Thus, if you have success in a given stock over time- something you should religiously study by looking at your past trades- stick with what works. Markets in Asia were weaker overnight with Tokyo down 1.2% and Hong Kong off 1%. European bourses traded lower initially but have come back; they are now mixed with Frankfurt up 0.2% and London down 0.3%. The dollar is marginally weaker across the board, gold is notably down by about 2/3% with oil down slightly. Bonds are flat. Futures were down sharply overnight (7 S&P handles and 50 Dow points) but have come all the way back. The Case-Shiller Index is out at 9AM with a 3.4% gain expected and a reading of 52.9 expected for Consumer confidence at 10AM. The tone of the market remains good but it will likely be choppier today with yesterday closing so weak. Look for one of those days with a bid underneath the surface but a huge rally not taking place either. The âbouncing ballâ effect seems apt with no urgency to sell things right now..yet thereâs no new reason to buy thus prices will be trapped all day in all likelihood in a narrow range. 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 RIMM- unveiled Playbook Tablet computer CGNX- great earnings guidance CXW- good earnings guidance LDK- closed near a high after receiving major financing RINO- closed near a high NPD- closed on a high BIDU- closed near a high after a brokerage upgrade GBX- closed near a high after updating earnings AMCN- closed near a high REE- closed near a high LULU- featured on âMad Moneyâ last night CCSC- 5 million share IPO debuting at 16.50, above expected range of 14-16 WAG- good earnings Bad-The following stocks have bad news and/or a weak technical pattern JBL- poor earnings ENTR- share offering UNFI- share offering NR- share offering AEC- share offering MTB- closed near a low amid worries about merger talks breaking down CSGS- closed near a low after a brokerage downgrade EDU- closed near a low ISLN- closed near a low after a Goldman Sachs downgrade INFN- closed near a low AAPL- closed near a low GS- closed near a low MON- closed near a low WYNN- closed near a low after a brokerage downgrade KBH- cut to âSellâ at Goldman Sachs Earnings: TUES SEP 28 BEFORE WAG TUES SEP 28 AFTER ZZ Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President
WED. SEP. 29- A Flash Crash Test Case On Monday, the stock of progress Energy (PGN) was halted for five minutes upon declining 90% in one second. It instigated a circuit breaker designed to allow for single stocks to pause in the event of sudden movements typically caused by âfat fingers.â According to the NASDAQ stock market, this was the case here with the plunge caused by an âinaccurate limit price entered by a trading firm.â What was interesting is that the system is designed to call for a stock to pause when a decline of 10% is in place yet it failed badly here. The stock was trading at 44.61 before the halt and should have been halted at 40.08. However, there were several dozen transactions intra-second which drove the price of the stock to 4.57. The interesting thing here is that the stock did not trade below 40.08 on the NYSE; rather, these transactions occurred only on electronic markets. There are two take-aways. First, when the SEC gave the thumbs-up to this mechanism a couple of weeks ago, the agency noted âWhen an individual stock trading pause is triggered, transactions could occur before the trading pause is fully implemented on all of the exchanges.â Furthermore, when that occurs, the stock exchanges are supposed to go over âall transactions triggering an individual stock trading pause and subsequent transactions that may occur before the trading pause is in effect.â I take note of this because most people are not aware of that verbiage and I want everyone out there reading this to note that the SEC itself is aware that their system is not fail-safe. But the 2nd thing is the even more relevant thing. As noted in yesterday morningâs mini-panic in AAPL, even a rumor can drive down a stock and keep it down even as the rumor is proven to be false (as was the case yesterday). But in a case such as PGN, the 90% collapse occurred in a second. What this means is that it is entirely possible that many stocks can do this simultaneously. I abhor being a fear-monger and don't think it's a major worry, but really- think about it. If a staid utility stock like PGN could have a circuit breaker fail, isnât the likelihood for potential computer error at least the same if not worse than it was before the May 6? My simple answer- âI donât knowâ- simply makes me want to point out that based on the failure of PGNâs decline to be contained when it traded down 10%, anything is possible- and that- that is scary. Markets in Asia overnight were higher with Tokyo up 0.7% and Hong Kong ahead 1.2%. The story is a little different in Europe with the bourses slightly weaker across the board by 0.1% to 0.3% amid some debt worries. The dollar is down moderately against the yen and the euro, oil and bonds are slightly weaker, and gold is slightly stronger. Thereâs no major economic news today but for the weekly crude oil inventories report. Futures are marginally higher. The markets definitely seem to be at a crossroads with bonds and gold hitting contract highs with the dollar weakening yet equities keep rising. For today, the trend will likely continue but it stands to be a very choppy session with an uncomfortable feel over everything for me as yesterdayâs every morning shock declines show it wonât take much for things to reverse. But the forces of end-of-quarter window dressing and trapped shorts should counteract a lot of that nervousness 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 HPQ- decent earnings guidance RHT, CRUS- featured on âMad Moneyâ last night WAG- closed near a high after announcing great earnings LULU- closed near a high CGNX- closed near a high after announcing great earnings ROVI- closed near a high KGJI- closed on a high HDY- closed near a high VSR- closed near a high ACAT- closed near a high BWEN- closed near a high TRN- closed near a high PGNX- announced approval of new ready-to-use pre-filled Relistor syringes in the U.S., EU, and Canada BVN- closed near a high IL- closed near a high ZGEN- positive favorable survival data from IL-21 Phase 2a melanoma trial FDO- good earnings Bad-The following stocks have bad news and/or a weak technical pattern GMCR- indicated a small accounting error from 2007, but an SEC inquiry as well ZZ- poor earnings SMSC- poor earnings guidance CHTP- share offering MTRX- poor earnings MON- closed near a low amid pricing worries on one of its products MCP- closed near a low AMED- closed near a low after receiving a civil investigative demand from U.S. Department of Justice ENDP- island reversal in closing near a low after announcing an accretive acquisition CCSC- island reversal in closing near a low on its IPO Earnings: WED SEP 29 BEFORE ATU FDO WED SEP 29 AFTER MDRX XRTX Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President
THURS. SEP. 30- Fed Speak Over the last few weeks, I along with many other much more prominent (and well-versed) individuals have discussed the divisiveness prevalent at the Federal Reserve. Well, on an otherwise slow day of trading yesterday, the day was punctuated by one interesting feature- three Fed officials all had competing speeches regarding the state of the economy and how much (or little) help will be forthcoming from the Fed. The president of the Federal Reserve Bank of Minneapolis (Narayana Kocherlakota) and the president of the Federal Reserve Bank of Philadelphia (Charles Plosser) made a case that a quantitative easing would not really aid the economy while the president of the Federal Reserve Bank of Boston (Eric Rosengren) intimated that Fed policymakers need to do what they can to aid the situation. In their speeches, both Plosser and Kocherlakota noted that they felt that quantitative easing would not drive down rates much less impact the economy as much as it did during the height of the recession. As financial markets are more stable now than two years ago this time, the difference between Treasury securities and rates on other loans has narrowed. Rosengren in contrast felt that the government could do more to benefit the economy such as implement policies targeted at lowering unemployment and reducing the possibility of deflation. Interestingly, Rosengren is currently a voting member of the Federal Open Market Committee (the group that makes decisions on interest rates and other policies) with a two-day meeting due to wrap up on November 3- just ahead of the election. What was notable today was how clear it truly is that there is widespread dissension even among the nationâs highest economic decision makers much less a crystal clear notion that the Fed is truly worried about the economy. For day traders, with stock prices whipping around as these gentlemen spoke and many more speeches to come in the next few weeks with speculation rampant as to what the Fed will do (or wonât do) ahead of the mid-term elections, it is but one more feature likely to constantly monitor. The Nikkei plunged 2% overnight as worries that the yen intervention are failing crept in although other Asian markets were mixed. In Europe, markets have shaken off all sorts of bad news from the de facto nationalization of Allied Irish Bank to a downgrade of Spanish debt in trading higher by about 0.1% to 0.3% across the board. State-side, futures have also shaken off the passage of a bill by the House of Representatives aimed at the Chinese yuan. GDP data and jobless claims data came in marginally better than expected. Chicago PMI of 56 is due out at 9:45AM. Oil and gold are both higher, bonds are slightly stronger, and the dollar is weaker across the board. Futures are nicely higher. For today, the action of the market is downright bullish this morning. It would not have surprised me to have come in and see the market down 10 S&P handles, but itâs up. Look for the strength to hold albeit not augment. Focus on the major news plays such as AIG and associated companies with its news, big cap techs, and relative weakness plays. 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 SNTS- positive phase III Budesonide MMX results HYC- received $5.25/share cash buyout bid from PAY SNX- good earnings WOR- decent earnings NFLX- closed near the high of the day at a record high V- closed near a high OCLR- closed near a high THO- closed near a high after posting great earnings IIG- closed near a high BIDU- closed near a high SGEN- closed near a high LLNW- featured on âMad Moneyâ last night PLX- closed near a high EXXI- closed near a high IDSA- closed near a high NANO- closed near a high AIG- announced plan to repay U.S. government MKC- decent earnings RNO- 3.2 million share IPO at 20.50, near high end of expected 19-21 range Bad-The following stocks have bad news and/or a weak technical pattern XRTX- poor earnings NCT- canceling dividend for the quarter QLIK- closed near a low GMCR- closed near a low amid an SEC accounting probe URBN- closed near a low OMN- poor earnings SFUN- closed near a low FUQI- received NASDAQ delisting letter AIB- will undergo major capital raise PRU- acquiring two Japanese units of AIG for $4.8 billion VLCCF- 4.25 million share offering at 19 ELT- pricing 16.2 million ADS IPO at 13, below 14-16 range Earnings: THURS SEP 30 BEFORE MKC THURS SEP 30 AFTER A.CN BLUD LWSN RECN Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President
FRI. OCT. 1- Time To See The Volume? Iâve discussed the concept of volume quite a bit in the last few weeks in this space. I actually have something quite important to discuss in coming days, but for today, I want to focus on the continuing (largely fruitless) wait for volume to âcome back.â In August, there was some attribution to summer slowness (although few people paid attention to the fact that total volume was down almost 40% in August 10 when compared to August 2009. I described this on August 23 (http://epiphanytrading.blogspot.com/2010_08_23_archive.html) and then again on September 7 (http://epiphanytrading.blogspot.com/2010_09_07_archive.html). Well, weâre winding up a fantastic month for the stock market- one in which the S&P 500 is poised to have its best September back since âThe Wizard Of Ozâ debuted in 1939 (a year by the way in which âGone With The Wind,â âGoodbye, Mr. Chips,â âMr. Smith Goes to Washington,â âOf Mice And Men,â and âWuthering Heightsâ were all nominated for Best Pictureâ¦an incredible year for cinema). But back to the focus- despite the rabid strength of the market this month, September volume is also on pace to be about 35% lower than it was in September last year. So, what gives? Three things. First, there is just a palpable air of uncertainty with the whole stock market in general. In a bullish phase (such as September), people donât want to be left out on the upside but are scared to jump in. In a bearish phase (such as August), people are holding on in thinking things are turning a bit but dropping bids âjust in case.â Second, the flash crash of May 6 is attributed to the lack of volume. I donât place as much credence in that notion personally, but there is no doubt that a seemingly random 1,000 point Dow drop did cause a great deal of consternation for many investors and funds. The third reason was described in massive detail on August 5 (http://epiphanytrading.blogspot.com/2010_08_05_archive.html). I wonât repeat that whole dayâs important content, but the gist of it was that the impact of high frequency trading on volume is enormous. There is price improvement overall many times, but less liquidity due to the computer-generated movements. So, as October looms, it is going to be a very telling month for volume. With the market at relatively lofty levels, it will be quite interesting to see if some of the volume comes back in garnering interest (right or wrong) at the higher levels for prices. Earnings season will commence next week with the major part of it occurring throughout the month. The mutual fund fiscal year ends on October 31. Finally, there are all sorts of calendar worries based on Octobers past. So, letâs hope for the best for some October volume as it will be the true indicator of total interest in the stock market. Markets in Asia were generally higher after a positive economic report out of China with Tokyo up 0.4%. The gains were even stronger in Europe as London and Frankfurt both gained about 0.7%. Gold is higher once again by about ½%, oil by almost 1%, and the dollar and bonds are both weaker. Personal income came in better than expected this morning. In harking all the way back to yesterdayâs post about Fed governors, the Fedâs Dudley noted that further Fed action to support the economy is âlikely,â there could be medium and long-term treasuries bought, and unemployment remains too high while inflation remains too low. Futures are higher with the Chinese report outweighing everything. Look for a slower day than yesterday as the Northeast storm is going to keep some people home. The strength should hold although yesterdayâs sell-off was a bit disconcerting. Focus in particular on relative weakness plays on the open, the earnings plays such as CAN, and big cap techs which should be moving all day. 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 GYMB- putting itself up for sale A.CN- decent earnings RECN- decent earnings CSIQ- closed near a high after an upgrade from Jeffries EDMC- closed near a high among other education stocks on proposed legislative changes for the pay-for education industry AMCN- closed near a high after renewing its concession rights contract with China Southern Airlines CVD- closed near a high amid a 10-year R&D outsourcing deal with Sanofi PAY- closed near a high BORN- closed on a high DEAR- closed near a high LCRY- closed near a high after posting good earnings COP, ALKS- featured on âMad Moneyâ last night CCIH- dbeuting as IPO with 6.06 million shares at 13.90 above expected range of 10-12 Bad-The following stocks have bad news and/or a weak technical pattern HPQ- named new CEO; market seems to have been disappointed in choice after-hours TNK- share offering DVOX- warned on earnings WCRX- share offering NFLX- major intra-day reversal in closing near a low CTXS- closed near a low ROVI- closed near a low PPD- closed near a low KEYW- debuting as IPO at 10 (9.1 million shares) at low end of 10-12 range. Earnings: None today Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President
MON. OCT. 4- The Other Markets The stock market has had a very good month or so. But equity traders are hopefully paying attention to all of the other markets out there as the breadth of the movement has been nothing short of stunning. Pick a market. Any market. Letâs start with commodities. Gold has risen to nominal record highs day after day after day with bullion selling now at over $1,300/oz. Oil surged in the last week to close at a multi-month high over $80/barrel. The dollar has gotten absolutely crushed with the Japanese intervention already seemingly a distant memory and a close approaching $1.38/euro (almost a 15% decline in a couple of months). The 10-year bond yield hovers at 2.50% just off of its generational lows. The more esoteric markets are moving too with everything from sugar to cotton having made major moves. The reasoning behind these moves start with gold. Most central banks are hoarding their gold with big investors quietly gobbling up whatever else is out there on a fear that the world is awash in paper thus making the precious yellow a true benchmark asset. With that comes a lowering of the U.S. dollar in particular as most everything is priced in dollars plus there are fears that the economic recovery is stalling. Furthermore, the U.S. Federal Reserve continues to maintain its easy money policy plus the thinking that a 2nd quantitative easing lies ahead along with fears of a renewed recession has plowed money into bonds. Largely because of these moves, the stock market has had some buoyancy to it as there is precious little yield in bonds with domestic stocks suddenly looking cheap. On any given day, there are gargantuan moves in some of these external markets so particularly with volatility picking up recently as we head into earnings season, keep an eye on all markets. The moves made before our markets open can paint a picture for the day that much more than usual while moves made during the day may well shape trading over the course of the next few weeks on an intra-day basis. Markets in Asia were higher overnight with Hong Kong up 1.2% and Tokyo ahead 0.3%. But prices are weighed down in Europe on worries over debt (again) but also nervousness over a broad terror alert with London down 0.5% and Frankfurt off 1.1%. Gold is actually down slightly along with oil and the dollar but bonds are up slightly. Futures are down in the pre-open. Factory orders (-0.4%) and Pending Home Sales (1%) are due out at 10AM. Look for a downside bias for the day but it should be limited amidst the heels of the recent strong rally and the nice uptick in financials on Friday. Focus on relative strength plays, the stocks up on actual mergers as well as merger rumors, and the aforementioned financial sector to see if there is follow-through. 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 FCX- closed near a high GS- closed near a high RIMM- closed near a high MCP- closed near a high CVV- closed near a high after announcing significant new orders for the third quarter CAAS- closed near a high DDMX- to be acquired for 21.25/share by Greenbriar Equity Group PPD- poor 3rd quarter production results WXCO- closed near a high TPL- closed near a high TRGL- closed near a high AMAG- closed near a high ACTG- closed near a high after resolving patent issues with Microsoft and entering into an agreement with Phillips Electronics ACTL- to be acquired by MSCC for 20.88/share V/MA- settlement in ongoing lawsuit against government expected imminently CLSN- received positive FDA guidance for its new drug application for Thermodox AAPL- initiated âBuyâ at Ticonderoga with a 441/share price target SLE- âNY Postâ reported SLE is in play Bad-The following stocks have bad news and/or a weak technical pattern BIDU- closed near a low NFLX- closed near a low AMZN- closed near a low DVOX- closed near a low after warning on earnings SDTH- CFO resigned for personal reasons CBK- closed near a low after warning on earnings TSLA- issued voluntary recall on several Roadsters BNVI- closed near a low after announcing an intra-day share offering LPS- closed near a low PAY- closed near a low HURN- divested its disputes and investigations practice to Grant Thornton and cut guidance BPZ- A-17D well deemed a dry hole GTSI- Eyak announced withdrawal of proposal to acquire company for 7.50/share Earnings: MON OCT 4 BEFORE None today MON OCT 4 AFTER MOS Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President
TUES. OCT. 5- Terrorizing The Markets I grew up in Savannah, GA, but often visited the greater New York area over the years because my father grew up in the borough of Queens (about a 10 minute walk from the St. John's University campus). I made frequent trips into Manhattan with my family doing everything from touring the NBC Studios to going on the Staten Island Ferry to of course paying a visit (or 20) to the New York Stock Exchange. I eventually settled in the Chicago area and got married- as it turns out to a girl who grew up on Long Island. I was in Chicago on September 11, 2001 when the Twin Towers came down. My first visit to Manhattan after that horrible day came in early October. The city was an entirely different place with a lot of the energy seemingly sucked out of it. That energy has gradually and happily come back to the point that when I went to the since-closed Broadway show "Enron" on 44th Street between 7th and 8th Avenues recently with my wife, it was the first time I'd visited Manhattan since 9/11/01 without thinking of that day. As a father with two kids, I got a very disturbing chill when six days later, someone tried to detonate a car bomb less than 1/2 mile from where I had been. Thankfully, there were no fatalities but it brought back to mind how the markets acted in the weeks after the 9/11 bombings. Almost every gyration was sparked by a rumor of some sort- bin Laden had been captured or a terrorist blew up an ill-fated airplane which crashed in Queens a few weeks later or an anthrax outbreak was to occur. Normalcy (with time) prevailed. But normalcy comes with a price- and that is taking the risk premium for terrorism back out of the markets. That Monday morning a few weeks ago was a day in which the euro was moving and there were all sorts of worries about the Gulf Oil slick. But it was fascinating to me that the market actually took its biggest hits that day not in direct correlation with the euro or oil prices but with the news about the terrorists. There was a short covering rally in the futures when it was announced that the attempted bomber was apprehended (before the open of the markets) and the biggest dive was taken at the time when we learned that the bomber apparently had ties to Middle Eastern terrorist groups. So, an old bugaboo is coming back to trading- the terrorist premium. This will likely not be a day-to-day phenomenon (hopefully and thankfully anytime soon) so I would not let it overly dominate your thoughts in day trading. With that in mind, it was very interesting to note that the Asian markets were up on Sunday night yet the European bourses traded lower with the weakness attributed to worries about a vague takeover threat. In any case, it clearly shows that a wild currency move and oil glop in the Gulf of Mexico still cannot out-dominate headlines about terrorism as well as the fact that terrorism as a story still can move markets on any given day. Markets in Asia were higher overnight with Hong Kong up a tinge but Tokyo was up 1.5%. The main story out there is that The Japanese government has caved and has embarked on a major stimulus program in that they look to cut interest rates to zero and buy government bonds. European markets have followed suit with the bourses generally up 0.5% to 0.75% across the board. Whatâs interesting is that the yen is *still* stronger. Gold is up sharply. Oil is up a bit again and bonds are up again with the 2-year yield at a new record low. Equity futures are very strong with broad support across the board. It is very disconcerting to old-fashioned me that gold is very strong and the yen is failing to react yet stocks are stronger. But all I/we can do is trade what I/we see. Thus, look for the strength to hold as the tone is so very good. Focus on the financials, the techs, the fertilizers what with the MOS earnings and POT rumors, and all relative weakness plays as the morning progresses. 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 CLDX- Reuters reported that patients with glioblastoma (a form of brain cancer) treated with CLDXâs vaccine lived nearly as long as those who received radiation and chemotherapy VHC- closed near a high REGN- closed near a high GYMB- hired Goldman Sachs to explore selling the company Bad-The following stocks have bad news and/or a weak technical pattern MOS- poor earnings AXP- closed near a low after the U.S. Justice Department sued AXP on antitrust charges HURN- closed near a low after revising revenue guidance JKS- closed near a low STRA- closed on a low MELI- closed near a low TLB- cut revenue targets Earnings: TUES OCT 5 BEFORE None today TUES OCT 5 AFTER YUM Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President