WED. NOV. 17- All The World's A Stage In his inaugural address before commencing his presidency, Thomas Jefferson noted his commitment to âpeace, commerce, and honest friendship with all nations, entangling alliances with none.â By that last phrase, he lent credence to the isolationists of the world in guarding against commitments with foreign nations. Basically, he wants to be on good terms so as to avoid war but not enough to cause irreparable damage politically or economically. The best analogy I can come up with is in knowing your neighbors for five houses/apartments in all directions. In this day and age, most of us may have met them, but donât really know them and thus donât have issues yet donât have relationships which may or may not be beneficial to all. Well, thatâs not how it works in the world economy as ostensibly every nationâs fate is tied to every other nation- particular in the modernized Western world and Far East. This is why I wrote this piece on Friday which I implored everyone to read and understand to the point we had an extended morning call regarding the topic on that day: http://epiphanytrading.blogspot.com/search?q=irish+eyes Well, yesterday, Ireland and other nations in Europe as well as China came to the forefront. The acute cash crisis almost came to a head yesterday for Irelanders with rumors of bailout programs and austerity measures flying all over the tape. The domino effect went to Greece as well when Austria indicated it may not be willing to do their part to help finance Greeceâs package because in their view, Greece wasnât doing enough to solve their own problems. Furthermore, Korea raised a benchmark interest rate and China intimated that price controls may go into effect on various products. How many people realize that according to âThe Financial News of London,â vegetable prices exploded over 60% above last yearâs prices in the first 10 days of November in China? Well, the whole world is intertwined. Thus, worries about Chinese inflation impacted commodity prices while worries about European economies had an impact on the dollar- all of which had an impact on the stock market. So as we day traders go forward, it is of crucial importance in the immediate-run to be certain to not only be aware of what is going on state-side but to also know what is going on overseas. Markets overnight were generally lower in Asia. Tokyo was actually ahead 0.2% on the weaker yen, but Hong Kong and Shanghai both declined another 2%. In Europe, prices are lightly mixed with London down 0.1% and Frankfurt ahead 0.3% as of this writing. The dollar is little changed, bonds are given back a little of yesterdayâs afternoon rally, and gold is up a touch with oil down a touch. CPI (0.3%), Core CPI (0.1%), Housing Starts (600K), and Building Permits (565K) are due out at 8:30AM with crude inventories due out at 10:30AM. Futures are slightly higher as of this writing. For the day, look for a less volatile session than yesterday with prices likely rebounding slightly as there still seems to be a lift from last night as the world political and economic situation has stabilized a bit with Ireland being viewed as not in immediate-term need of financing (for the time being anyway).. Focus on the biotechs in the news (such as HGSI), the earnings plays, the merger plays, the stocks with share offerings, and big cap tech and financials. 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 HGSI, GSK- received positive FDA panel approval vote for lupus drug Benlysta STV- decent earnings POT- announced $2 billion stock repurchase program DKS- closed near a high after posting great earnings URBN- closed near a high after posting great earnings ONE- closed near a high DGW- good earnings TGT- decent earnings BJ- decent earnings CHS- decent earnings VIT- decent earnings HYC- to be acquired by PAY for .23 shares of PAY LDSH- to be acquired by ATI for $24/share plus .4556 shares of ATI Bad-The following stocks have bad news and/or a weak technical pattern SINA- poor earnings NOG- share offering CVI- share offering AVNR- share offering PWRD- closed near a low after posting bad earnings BIDU- closed near a low LVS- closed near a low MA- closed near a low GOOG- closed near a low FSLR- mentioned negatively on âMad Moneyâ last night STP- poor earnings Earnings: WED NOV 17 BEFORE BJ CHS DGW STP TGT VIT WED NOV 17 AFTER AMAT ARUN DRYS LTD NTAP NTES PETM SPRD Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President
THURS. NOV. 18- Stability Vs Gambling Has anyone ever gone to Vegas or Atlantic City and placed a $100 bet on, say, red on the roulette wheel? Letâs say you lose. You decide to double down by betting another $100. And lose again. Now youâre down $200. You double down again. You lose again. Now youâre down $400. You double down again. Now youâre down $800. You double down again. And lose again. Now youâre down $1,600. And again. $3,200. And again. $6.400. And again. $12,800. And again. $25,600. And again. $51,200. And again. $102,400. And again. $204,800. And again. $409,600. And again. $819,200. And again. $1,638,400. That means if youâre wrong 15 times in a row, you lose $1,638,400 and have to bet that much the 16th timeâ¦just to break even. However, if youâve been wrong 15 times in a row but simply bet $100 each time, youâre down $1,500. Little bit of a difference, huh? Now, it is admittedly highly unlikely that one can be wrong 15 times in a row at the roulette wheel, but not impossible. Furthermore, there is a much higher chance that one can have 15 losing trades in a row. So why is it that traders tend to double, triple, quadruple or more down when a position goes against them? Well, thatâs a point Iâve made here countless times. More relevantly here, letâs say a trader gets flatâ¦why then would he/she place much bigger orders than normal if that individual was already down money on the day? Simple. An innate desire to get his/her money back. But that is the exact opposite way one should play it. When losing repeatedly, psychology can become morose thus one holds a financial gun to their head by ramping up size after exiting a position when initiating a new position. Instead, what has worked for me is shrinking position size slightly when losing just to get a rhythm and then expanding sizes anew back to normal size. When winning, increase size a bit but if losing a rhythm, shrink the attempts back to normal size. But the bottom line is to maintain your normal size overall and/or not to stray too far from it at anytime. First, maintaining size enables one to keep a semblance of normalcy about them even in extraordinarily wonderful or difficult times. Second, it keeps your trading account stable in not taking on too much risk particularly on good days when one can give up all of their gains and more. And most importantly, on particularly bad days, it keeps one from blowing out their trading stake. Thus, if what youâre doing overall tends to work, by keeping your head- and trading size stable, you can keep yourself solvent alwaysâ¦and a winning trader overall. Markets were very strong overnight with Hong Kong and Tokyo both up about 2%. In Europe, London and Frankfurt are both ahead 1.5% with Paris up 2.5%. The dollar is flat against the yen but weaker against the euro. Gold and oil are sharply higher. The two main key cogs are the GM buzz but also the head of the Irish Central Bank came out and accepted the fact that Irish banks will need a capital infusion. So, it now seems like whatever action may happen will now be allowed to happen. State-side, futures are sharply higher. For the day, itâll depend on the Irish headlines and the âGMâ ticker, but there will likely be a little bit of selling into the initial euphoria. Focus on the biotechs in the news once again (DNDN for instance), the auto stocks (GM, F, AXL, JCI), earnings plays, retailers, and relative weakness plays (particularly early). 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 DNDN- received approval from a Medicare panel CLNE, AXL, JCI- featured on âMad Moneyâ last night LTD- decent earnings and declared special $3/share dividend DRYS- good earnings ARUN- decent earnings SPRD- decent earnings CMED- closed near a high after posting great earnings SIHI- closed near a high TGT- closed near a high after posting great earnings NTES- decent earnings CDTI âclosed near a high JCG- closed near a high BKE- decent earnings HP- decent earnings PLCE- decent earnings LTXC- being bought out by BRGY for .96 shares of VRGY for each LTXC share EXEL- positive phase II ovarian cancer XL 184 data CSIQ- decent earnings AUMN- initiated at Rodman and Renshaw with a 50/share price target MBT- decent earnings GMO- signed memo of cooperation with EXIM Bank of China Bad-The following stocks have bad news and/or a weak technical pattern PETM- poor earnings HEAT- share offering JKS- closed near a low DQ- closed near a low after posting terrible earnings FSLR- closed near a low APWR- postponed earnings release SNCR- 4.26 million share offering at 25.40 BORN- closed near a low ASYS- closed near a low SIRO- poor earnings NILE- CFO resigned WLT- in talks to buy Western Coal of Canada HUM- warned on earnings guidance SHLD- bad earnings WSM- poor earnings Earnings: THURS NOV 18 BEFORE AEO APWR BKE CSIQ DLTR GME HP PLCE ROST SHLD SJM SPLS WSM THURS NOV 18 AFTER ADSK ATW BCSI CRM DELL FL GPS INTU MRVL WTSLA Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President
FRI. NOV. 19- Reacting To GM One of the most misquoted lines in American history is âWhatâs good for General Motors is good for America.â What was actually said occurred in a 1953 hearing. President Eisenhower nominated then-GM CEO Charles Wilson to be Secretary of Defense. During the nomination hearings, Wilson was asked if he could make a decision as a secretary of defense which would not be in GMâs interests. Wilson noted that he could not conceive of such a scenario âbecause for years I thought what was good for the country was good for General motors and vice versa.â In truth, therefore, the perception of arrogance was in actuality true humbleness. In any case, the General Motors name dates back to 1908 and is as iconic a name as there has ever been in American corporate history. The company *still* has over 200,000 employees and sells vehicles in over 150 countries. However, the fact of the matter is that by market capitalization, it is actually about 1/15th the size of Apple (AAPL) for perspective. In any case, investment brokers and GM executives literally did about as perfect a job as possible in re-debuting the streamlined IPO yesterday in that the stock held its IPO price, didnât go crazy, and were able to float the stock in a market that nobody thought possible 12-18 months ago. In the long run, it has often signaled a peak in the market when people are scrambling to buy stock from the smartest people out there. For instance, when Blackstone (BX) debuted a few years ago, the S&P 500 promptly fell 10% in the course of the next four months. Visa (V), the largest offering, debuted in the late 2007/early 2008 timeframeâ¦just before the S%P 500 fell 50% within the next 1 ¼ years. Thus, it is something to be weary of. However, in the immediate-term, there is/was a sense of euphoria that maybe- just maybe- things are gonna be OK. Many people never thought GM would sell a car every again when they went under and here we are a few months later and they are having a successful auction. This does show perception-wise if nothing else how things have changed. So, thereâs this surge of adrenalin that coursed through the markets yesterday particularly combined with the chatter out of Ireland that the Irish Central Bank was willing to admit they needed help and indeed may get aid for its banks(IRE and AIB both traded over 10% higher yesterday). Now, nothing may come of any of this in the long-run. Thereâs a moral hazard issue in Ireland and GM flat-out noted in its prospectus that it still doesnât have a grip on its accounting! But sometimes all a market needs is hope and the thought that things are getting a better. Ergo, yesterday was one of those rare âfeverâ days whereby emotion truly drove stock prices. Markets overnight were flat in Asia with Tokyo up 0.1% and Hong Kong down 0.1%. Prices are generally lower in Europe, however, as China once again boosted interest rates and there has been an on-going press conference with Bernanke and top EU officials all morning. Frankfurt is down 0.2% and London off 1.1%. The dollar is weaker across the board with oil and gold down marginally. Futures are off a little as well. Thereâs no economic news out today and itâs a monthly options expiration Friday. After a tumultuous week, look for a much quieter day with action focused on the open and close. Keep an eye on the news ticker in case anything unusual comes out of Europe. The focus should be on solars (things like JKS and FSLR have been thrashed the last few days), the cloud plays (CRM way up), casinos, and the biotechs in the news (MELA, AMGN). 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 CRM- good earnings DELL- good earnings FL- good earnings AAPL- closed near a high HUM- closed near a high in an island reversal after posting poor earnings guidance POT- closed near a high ATW- decent earnings MHR- closed near a high ENMD- closed near a high JAZZ- closed near a high SIGA- closed near a high after the U.S. government reiterated it was committed to smallpox vaccines LVS- Moodyâs lifted long-term debt ratings AMGN- received FDA approval for XGEVA (a bone targeted therapy for cancer patients) MELA- FDA advisory panel voted positively for MetaFind DLM- rumored to be in talks to be acquired by KKR for 18.50/share HIBB- decent earnings YGE- decent earnings ANN- decent earnings Bad-The following stocks have bad news and/or a weak technical pattern GPS- poor earnings INTU- poor earnings MRVL- poor earnings ADSK- poor earnings BCSI- poor earnings SOMX- share offering ASTM- closed near a low after issuing poor phase IIb data on one of its products MCP- closed near a low Earnings: FRI NOV 19 BEFORE ANN HIBB HNZ MENT YGE Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President
Mon. Nov. 21- Muni Mess For those who follow municipal bonds, the first half of last week was quite startling. For those not familiar, municipal bonds are financial instruments used to finance the debt much less operations of a city or state. Many investors like to purchase these financial instruments because the gains are tax free with the returns a bit higher than that of owning government securities. The reason for this is the risk inherent with own the debt of municipalities is higher than that (theoretically) of owning debt of the federal government. For instance, the yield on 5-year Detroit muni bonds is hovering between 5.5% and 6% with the 5-year yield on U.S. Treasuries is around 1.5%. The extra yield for Detroit bonds is for the risk youâll be taking at the Detroit can stay solvent for the next few years. In normal times- even extraordinary times- municipal bonds tend to stay steady as an asset class for the most part because there tends not to be a fear that many American cities could go bankrupt. This is beyond one of those extraordinary times. The MUB is a measure of S&P National Municipals. Itâd been in a tight range of about 102.50 to 107.50 all year. Yet in the last week, it plunged from 105.50 to 99! So whatâs going on in this usually staid asset sector? First, there is a pervasive fear that finances of many cities and states are worsening as rumors swirl about places like Harrisburg, PA. Second, there is a massive backlog of new bonds for sale in most bond markets right now particularly with the government pumping newly-created dollars into the system. For instance, California is going to have to sell almost $15 billion of debt this month because it hasnât had a budget signed this year as yet. Next, credit agency ratings such as Fitch for the 7th quarter in a row downgraded more muni bonds than upgraded the bonds. Next, the Build America Bonds program- part of the original fiscal stimulus program- will expire at the end of the year. Finally, the huge downtick in government bonds recently has spooked the muni market as well. While the muni bond market declines are symptomatic of everything else going, it is crucially important to watch for things like the California bond auction results in the coming days because things like that truly hit home and may well have an impact on equities in time. Markets in Asia were mixed overnight with Tokyo ahead 0.9% but Hong Kong was off 0.4%. While Tokyo was open, headlines began breaking in earnest that Ireland was going to accept an aggressive bailout package. Futures had a pop with Tokyo gaining as well at the time. But as the details have come out (murky at that) and the realization sets in as to how expensive this is going to be to implement, stocks became weighed down through Europe with London and Frankfurt off 0.8%. Bonds are a tinge higher with the dollar stronger against the euro. Gold and oil are quiet. Futures are down slightly. Overall, look for a quiet session pending a massive move in the euro and/or Irish stocks. The focus will likely be on the stocks rumored to be affected by the supposed SEC probe (GS for instance), the smaller biotechs in the news such as CLDX, and techs in the news such as NFLX and AMZN. 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 NOG- closed near a high after pricing a share offering CRM- closed near a high after posting great earnings CPWM- closed near a high after posting great earnings HIBB- closed near a high after posting great earnings ANR- closed near a high after expressing a desire to expand its metallurgical coal holdings WLT- closed near a high LNG- closed near a high IOC- closed near a high MCP- closed near a high CNX- closed near a high AH- closed near a high JKS- closed near a high WLP- closed near a high FCX- closed near a high LVS- closed near a high GMCR- restating some accountingâ¦but only by 4-5 a share total which was a lot better than some thought APKT- closed near a high CLH, AMRC- featured on âMad Moneyâ last night CLDX- positive results from Rindopepimut phase II brain cancer study REGN- reported positive top-line results of two phase III studies with VEGF Trap-Eye in Wet Age-related macular degeneration MAGS- awarded $21.4 million contract for a comprehensive security system AMZN- according to an AP report, AMZN will allow customers to give its Kindle e-books to others TSN- decent earnings SLXP- added to Conviction Buy list at Goldman Sachs NFLX- unveiled U.S. subscription plan for streaming movies and TV shows over the Internet for $7.99/month Bad-The following stocks have bad news and/or a weak technical pattern KIRK- closed near a low after posting poor earnings INTU- closed near a low after posting poor earnings CVVT- closed near a low after announcing a share offering VHC- closed near a low GSIC- closed near a low CTRN- poor earnings GS- âWSJâ reports U.S. authorities in vast insider trading probe Earnings: MON NOV 22 BEFORE CTRN TECD TSN MON NOV 22 AFTER ADI BRCD FMCN HPQ NUAN PSUN Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President
TUES. NOV. 23- Financial Trouble On Friday night around 8:30PM, a seemingly noxious story broke. The story gained traction over the weekend to the point that when I had a chance to get an update in between a myriad of some other major personal happenings, I looked at it. It was on the national news and every major news outlet out there. Somewhat surprisingly to me, it caught not only most traders who didnât glance at the news over the weekend off-guard, but the markets also initially fought off the story with Dow futures up almost 75 points at one point Sunday due to headlines coming out of Ireland. The headline that came across the newswires was as such: âWSJ: US In Vast Insider Trading Probe- Sources.â I saw that headline and my mind went into total conspiracy theory mode from wondering who the sources were to mulling the reason such a story would come out on an options expiration Friday. But read on I did. Below are the relevant portions of that article for brevity sake: âFederal authorities, capping a three-year investigation, are preparing insider-trading charges that could ensnare consultants, investment bankers, hedge-fund and mutual-fund traders and analysts across the nation, according to people familiar with the matter. The criminal and civil probes, which authorities say could eclipse the impact on the financial industry of any previous such investigation, are examining whether multiple insider-trading rings reaped illegal profits totaling tens of millions of dollars, the people say. Some charges could be brought before year- end, they say. The investigations, if they bear fruit, have the potential to expose a culture of pervasive insider trading in U.S. financial markets, including new ways non- public information is passed to traders through experts tied to specific industries or companies, federal authorities say.â Furthermore: âOne focus of the criminal investigation is examining whether nonpublic information was passed along by independent analysts and consultants who work for companies that provide "expert network" services to hedge funds and mutual funds. These companies set up meetings and calls with current and former managers from hundreds of companies for traders seeking an investing edge.â And: âIn another aspect of the probes, prosecutors and regulators are examining whether Goldman Sachs Group Inc. (GS) bankers leaked information about transactions, including health-care mergers, in ways that benefited certain investors, the people say. Goldman declined to comment. Independent analysts and research boutiques also are being examined. The article finally notes: âThe investigations have been conducted by federal prosecutors in New York, the FBI and the Securities and Exchange Commission. Representatives of the Manhattan U.S. Attorney's office, the FBI and the SEC declined to comment. Another aspect of the probe is an examination of whether traders at a number of hedge funds and trading firms, including First New York Securities LLC, improperly gained nonpublic information about pending health-care, technology and other merger deals, according to the people familiar with the matter.â The story fed on itself over the weekend but by yesterday, it was given relatively short shrift by the markets except for the fact GS was trading lower pre-hours (although I did note the story twice in yesterdayâs comments). But it began playing havoc with stock prices as the day progressed with GS extending to a 55 drop and rumors began flying. There are two major implications here. First, although many people feel strongly that the markets and individual stocks are manipulated, this type of story gives credence to an underlying program- confidence in the markets. Many investors and traders just donât feel they are on a playing field and this type of story only serves to enhance that line of thinking. Second, on a day trading basis as I discussed on yesterdayâs morning call, it can cause random volatility. Nobody knows exactly who is being probed nor do we know what their holdings are. So if there are thoughts that certain funds may have to liquidate and/or sell stock to raise capital, it can spark unusual moves in selected stocks (anything from financials to holdings of said funds). As we enter a low volume period, this story along with the Irish mess and the Korean skirmish will likely serve to dominate the headlines for the next few days if not a tad longer. In what will likely be an increasingly illiquid environment, be well aware that moves can come out of anywhere at anytime particularly in the financial sector and the high beta names so be prepared. Markets were down in Asia overnight on news that there was a skirmish between North Korea and South Korea after a North Korean ship launched a small attack on a small South Korean island in which several dozen homes were destroyed with a few casualties. Hong Kong was down 2.7%. The story is much the same in Europe with London down 0.75% and Paris down 1.5% and bond spreads widening dramatically in Spain. Commodities are down slightly with the dollar stronger against the euro in particular. Futures are much weaker in reaction to all of this. GDP came in pretty much as expected with existing home sales (4.42 million units) due out at 10AM and the November 3 FOMC Minutes out at 2PM. Today will be a headline driven day with eyes focused on news out of South Korea and Spain. The Korean situation should be stable for the day, but itâs a volatile environment. Focus on the myriad of earnings and relative strength plays with a compressed time horizon on lesser trade size on entries. 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 SYY- featured on âMad Moneyâ last night GMCR- closed near a high after announcing positive accounting changes after an internal investigation REGN- closed near a high after announcing some positive drug news AFFY- closed near a high after an upgrade CRUS- closed near a high after an upgrade GORO- closed near a high NOAH- closed near a high VHC- closed near a high CRM- closed near a high AAPL- closed near a high AMZN- closed near a high NFLX- closed near a high LVS- closed near a high AH- closed near a high TIN- closed near a high LULU- closed near a high FFIV- closed near a high TSLA- closed near a high ROSE- closed near a high JCG- rumored to be in talks to be sold to chairman and buyout firms BWS- decent earnings DSW- decent earnings HRL- decent earnings Bad-The following stocks have bad news and/or a weak technical pattern FMCN- poor earnings guidance NUAN- poor earnings BRCD- poor earnings PSUN- poor earnings JACK- poor earnings CPB- poor earnings Earnings: TUES NOV 23 BEFORE CBRL CPB DAKT DSW EV HRL MDT PDCO TNP ZLC TUES NOV 23 AFTER JCG TIVO VRGY Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President
WED. NOV. 24- Be Thankful Our forefathers lived in the Stone Age about a billion years ago. One billion months is about 82 million years. If you sat down to count from one to one billion and did at an average pace continually, itâd take 95 years to do it. A billion inches is about 16,000 miles or about halfway around the earth. The earth is 8,000 miles wide with the sun 800,000 miles wideâ¦that is a fraction of a million with one million being 0.1% of a billion! So, it is extraordinarily tragic to me that Darwinian theory applies here certainly to an extent in that none of those numbers are as mind-boggling to me as this one: 1 out of every 6 people living on our planet are starving. Every business day, I write about something relevant to trading. Well, it is of a great deal of importance of course that we do things as traders like earn a living so we can do basic things like eat. I get that and embody that spirit. With that in mind, itâs not lost on me for example that many nurses in hospices earn just above minimum wage. I donât delude myself. I play a computer game for a living. Trading is obviously a very hard profession as evidenced by its high drop-out rate and inability of many traders to procure a living. But I donât have to watch people literally die to earn a living. Nor am I starving. So, as we approach Thanksgiving and look forward to thinking about things like gluttony, football, and of course spending time with our families and friends tomorrow- even if a lot of other things are going wrong- be very very thankful for what you do have. Specifically, from a trading standpoint, be grateful if for nothing else that as a day trader, youâre in a sterile office setting with the hopes of earning a lot of money every dayâ¦with the likelihood of having a couple of meals on a daily basis quite high. And let me end on a very happy note by wishing everyone a very happy Thanksgiving and noting how thankful I am to know on a personal level many of the people reading this blog. Markets overnight were mixed in Asia with Tokyo down 0.8% but Hong Kong retraced 0.5% as the Korean headlines had broken the previous day when the Hang Seng was open but the Nikkei closed. The gains are even greater in Europe with most bourses up either side of 1%. The dollar and the commodities are quiet at this point. Futures are rebounding after yesterdayâs declines as things have stabilized ahead of the Thanksgiving holiday with the beginnings of a resolution in Ireland at that as it appears that there will be a de facto nationalization of the likes of IRE with the government taking greater than a 50% stake. There is a titanic amount of economic news. Personal Income (0.4%), Personal Spending (0.5%), PCE Prices- Core (0.1%), Durable Orders (-0.3%), Durable Orders ex transports (0.4%), Initial Claims (442,000), and Continuing Claims (4.28 mil) are all due out at 8:30AM, final Michigan Sentiment (69.4) at 9:55AM, New Home Sales (312,000) and the FHFA Home Price Index at 10AM, and Crude Inventories at 10:30AM. For the day, look for a placid session with muted reactions to all economic news albeit likely with an upside bias. The focus will likely be on the Irish situation, the earnings plays, the momentum stocks that defied the market yesterday, and relative strength 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 GES- great earnings AWI- declared special $13.74/share cash dividend SODA- closed near a high CRM- closed near a high IRE, AIB- according to the âFinancial Times,â the government of Ireland will take a majority stake in the Bank of Ireland DDMX- received $23.50/share takeover bid from DashNow ORCL- won $1.3 billion in damages from SAP TIF- decent earnings Bad-The following stocks have bad news and/or a weak technical pattern TIVO- poor earnings GS- closed near a low HRBN- closed near a low after amendments were made to the takeover offer on the table for the company WYNN, LVS- closed near their lows MA- closed near a low DEXO- closed near a low TPC- closed near a low after announcing a share offering CISG- closed near a low after posting bad earnings DE- poor earnings FRO- poor earnings Earnings: WED NOV 24 BEFORE DE FRO TIF Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President
FRI. NOV. 26- Children on The Floor Last year on the Friday after Thanksgiving, I wrote this piece: http://epiphanytrading.blogspot.com/2009_11_27_archive.html Everything from that post stands. Today is a day that is typically either very busy with a lot of movement- particularly in microcaps- or a day in which I find myself wondering why I bothered to get up at 5AM to come to work after a full Thanksgiving Day. So, indulge me if you will as I diverge slightly onto a fun topic. Now, much what I am about to denote is hearsay as I couldnât find *anything* on the Internet or the library, but I have it from some very good sources from the floor of the NYSE with those guys having the documentation. Wow. All that build-up for something that is unimportant in the scheme of things! As was included in last yearâs title, today is âKidâs Dayâ on the floor of the New York Stock Exchange. I got to wondering about the origin of it as a lot of the traders in my office- former NYSE floor guys themselves with parents who worked on the floor- did not remember any such occasion when they were children themselves. As the story goes, circa 1988, a few members of the support staff brought their kids to work just simply to show off the NYSE and show them around. Remember, the âTake Your Daughters To Work Dayâ was not started until 1993. In any case, there was a bit of a ruckus after it happened again the next year with traders and specialists wondering why their subordinates could bring their kids. So, a few of the NYSE floor people started bringing their kids to work to show them the floor and the computers. The movement gained traction over the next few years with the NYSE informally setting up things like coloring stations for the kids. As business network reporters gained access to the trading floor, they began showing some of the kids on television. Well, the pace of stock trading grew and interest in the stock market exploded during the 1990âs. The NYSE knew a marketing opportunity was there particularly with the great majority of traders now bringing their children to work in 1997 when it officially designated the day after Thanksgiving as Kidâs Day. There are now more formalized stations for children and everything is now done in a nice organized way. So, whether it is busy or slow today, do take a look up at the opening (and closing) bells and take a glance at all the children waving as itâs always a nice contrast to the business day ahead. Markets netted out for the last two days were up slightly in Tokyo and down slightly in Hong Kong. However, Europe in particular today is getting drubbed with all of the major bourses off well over 1% as debt spreads have widened dramatically in Ireland, Portugal, and Italy. The dollar is flat against the yen but much stronger against the euro. Consequently, commodities are sharply lower with oil and gold both down 1%. Futures are down sharply consequently in a bit of a reminder of the Abu Dhabi situation this time last year. For the short day, look for stability down there overall with rumor-driven illiquid trading. The focus will be almost all momentum-based with a dearth of news with particular attention paid to relative strength plays, small cap microcaps which closed near a high or low on Wednesday, and commodities 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 GES- closed near a high after posting great earnings AAPL- closed near a high AMZN- closed near a high CRM-closed near a high TIF- closed near a high after posting great earnings JKS- closed near a high LVS- closed near a high POT- closed near a high AAU- closed near a high after an oil discovery BGC- closed near a high MWW- closed near a high TTM- closed near a high BITA- closed near a high STV- closed near a high TGA- closed near a high CREE- closed near a high after an upgrade by Morgan Keegan ASCMA- closed near a high on rumors of an imminent buyout DLM- to be acquired for $19/share in cash CPII- to be acquired by Veritas Capital for $19/50/share in cash Bad-The following stocks have bad news and/or a weak technical pattern JADE- closed near a low MGA- no longer interested in buying an automaker Earnings: None today Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President
MON. NOV. 29- Cyber Monday The brick and mortar retailers and on-line sellers alike are arguably in more focus today for day traders than any other day of the year. The reason for this is that Black Friday is often an indication for how the entire holiday shopping season will go. Black Friday got its name because it is the day that retailers in theory go into profitable territory for the year (meaning their net gross margins are about 8%). And today is Cyber Monday as those of us who didnât want to battle the lines at Macyâs over the weekend tend to commence their holiday shopping. Thus, indications that many people tend to think are ridiculous such as tracking the amount of parking spaces taken up in a parking lot to the number of hits to a given website are often crucial pieces of data used by retail analysts. Early indications have already begun turning in of this anecdotal evidence as well as foot traffic populace and of course the amount of sales. What we of course donât know is something that reminds me of the old change commercial on âSaturday Night Liveâ whereby a firmâs primary business was making change. When asked how the entity made money, the faux bank president said âSimple. Volume.â This of course makes no sense because itâs a break-even. Well, itâs the same thing today- a company may have record sales but if they are discounting their merchandise, itâs a whole lot of sound and fury not signaling much. So as you look and study the numbers (which has hopefully been done by the time youâre reading this no matter your style of day trading as the holiday shopping season interpretation will likely matter a lot to the stock market today), Donât try to interpret how a company is doing based on the headlines. Rather, be aware of them and instead focus on the action of the stocks (particularly retailers) if youâre trading them. Markets overnight were higher in Asia as South Korea cancelled its war games plans with Tokyo up 0.8% and Hong Kong ahead 1.3%. However, the tone is different in Europe as news begins sinking in that Ireland has indeed received a near $100 billion bailout. But with the euro weakening, stocks sold off there a bit as London is off 0.5% and Frankfurt about 1%. Right now, the dollar is up almost 1 ½ euros, oil is up 0.5%, gold down 0.5%, and bonds up a bit. Futures are down but off of their lows. There is a battle between weakness from to the Irish debt crisis versus strong early indications in many cyber retailers. Look for this tug-of-war to maintain itself all day on light volume with relative strength in the NASDAQ. The focus will be on the cyber retailers, the big cap techs, the casinos, and small caps with relative strength. 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 NFLX- closed near a high BORN- closed near a high REE- closed near a high BSFT- closed near a high ASYS- closed near a high SYUT- closed near a high AMRN- positive phase III data from its Marine Study for AMR 101 to be used as a treatment for very high triglycerides SHOO- mentioned positively in âBarronâsâ Bad-The following stocks have bad news and/or a weak technical pattern FCX- closed near a low GS- closed near a low UNH- poor earnings guidance SWC- 37 million share secondary offering Earnings: None today Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President
TUES. NOV. 30- The Bailout Imagine if you will somebody who is in their mid 50's to mid 60's age-wise. This person has been very well-off for a number of years in running a series of businesses in a mid to larger-size town- probably the 2nd or 3rd wealthiest person in the town. Stable. Not flashy. Brings money home and supports his or her family, extended family, and is a major benefactor for several charities in addition to providing a few hundred jobs in the local economy. However, over the last 10 or 15 years, the person has acquired four planes, a yacht, moved into a mansion, and purchased seven cars- all while providing funding for the charities (which has increased) and running businesses (and trying to expand them in building things like new factories) which power the town's economy. In the interim, several large investors are providing the financial means for this local business person to operate his companies much less run his personal life. Suddenly, things turn for the worse. With the overleveraging, the person now disrupts not only his own personal world, but the lives of many other people. Should the business person be bailed out along with the people he affected so that the town will not crumble economically? Well, in Ireland right now, not only did the Irish get a near $100 billion bailout over the weekend, the actual investors of the debt are not going to have to eat all of their losses. It's not for me to be the moral authority on such issues nor to pontificate as to what the solution is in this space, but I do try to understand what's going on. In the immediate-term, this should provide some immediate-term stability in Europe. But yields on Irish, Spanish, and Portuguese debt skyrocketed the last few days in indicating the problems there are quite serious. So, as the next few months progress, it is going to be crucial to monitor the debt situation there to see if the euro can hold from the moral hazard measures being taken by all of Europe as well as the potential implications the whole mess could have our on the domestic stock market. Markets in Asia were down overnight with Hong Kong off 0.7% and Tokyo 1.9% amid Korean Peninsula worries as well as fears of more interest rate hikes in China. Stocks were mixed in Europe after yesterdayâs hefty downdraft with London and Paris both off about 0.3%, but Frankfurt holding positive ground if barely. The dollar continues to rally against the euro with 1.30 being challenged now, with gold up 0.5% but oil down slightly. The Case-Shiller 20-city Index is out at 9AM (1.0%), Chicago PMI (59.8) at 9:45AM, and Consumer Confidence at 10AM (52.0). Futures are getting hid very hard as debt spreads continue to widen throughout Europe with major worries over the debt of Portugal and Spain. For the day, the markets will likely remain down as yesterdayâs rally completely failed with gold and the dollar rallying. Keep an eye to that euro all day. The focus will likely be on early relative strength plays, big cap techs as they were all over the place yesterday, some of the smaller cap biotechs in the news (such as KERX), and the solars. 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 NFLX- closed near a high AAPL- closed near a high RIG- closed near a high SHAW- closed near a high after announcing it has begun discussions to extend its Westinghouse AP1000 agreement RBY- closed near a high after issuing a positive gold resource estimate at its Phoenix gold project FCX- closed near a high AMRN- closed near a high after announcing positive phase III data for AMR 101 CLDA- to sell Familion pharmacogenomic testing unit CAK- closed near a high after it announced gas discovery on the Zijinshan ENMD- closed near a high THRX- closed near a high after GSK announced it is going to buy 5.75 million THRX shares at 22.50 each RITT- closed near a high CIS- closed near a high TYPE- closed near a high BECN- closed near a high after posting earnings IBKR- announced special cash dividend of $1.79/share SODA- good earnings DECK- featured on âMad Moneyâ last night KERX- positive phase III Zerenex results RIMM- upgraded at Jeffries BEZ- to be acquired by ABB for $63.50/share in cash TSL- decent earnings Bad-The following stocks have bad news and/or a weak technical pattern CMED- share offering ALTR- lukewarm earnings guidance STX- announced it received no good offers for the company in its attempt to sell itself off; confirmed revenue guidance and established a $2 billion stock buyback program QLIK- announced 10 million share offering THO- poor earnings MCOX- poor earnings SDRL- bad earnings Earnings: TUES NOV 30 BEFORE BKS SDRL TSL TUES NOV 30 AFTER CPRT OVTI Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President
THURS. DEC. 2- Listening To What The Market Tells You As a kid, I like most other kids loved the week just before school ended. It was the anticipationâ¦the good feeling that all kinds of summer activities, and well, freedom was about to start. What got short shrift particularly in middle school and high school was the fact we had final exams that last week of school. If it was the 1st quarter, 2nd quarter, or 3rd quarter, the exams would be met with dread and intense study (well, for me anywayâ¦my parents were both teachers!). But that last quarter. That last quarter, no matter how much studying I did, I still had adrenalin coursing through me because I knew once I got past the difficult days in the immediate-term, fun lay ahead. Such was the case with the stock market from Friday-Tuesday. There was a heap of really bad news. From the Wikileaks worries to the European debt crisis with the strengthening dollar to nervousness about Korea, there was every reason for the market to have been drubbed. On Friday, the S&P 500 fell about 0.7%. On Monday, stocks got hit hard, but came back with the index settling down 0.2%. On Tuesday, stocks were crunched again initially but came back again with the S&P 500 down 0.6% (and the Dow down 0.2%). What the market was telling us was that summer was coming, i.e. the fact that it held so resiliently in the face of so much negative news set things up for a huge rally at the whiff of any good news. Mind you, it was as always quite difficult to foresee what that news would be, but the market by shaking almost everything off seemed to indicate the possibility of a day like yesterday. It is precisely why I noted in the markets section of the blog yesterday that the strength would likely hold. Basically, these past few days have been the ultimate case of âwhat doesnât kill you makes you go strongerâ in terms of the markets. Markets overnight were ahead in Asia with Hong Kong up 0.9% and Tokyo up 1.8%. In Europe, markets are stronger as well but a bit more muted with London up 0.6% and Frankfurt 0.2%. Oil is flat, gold up slightly (although platinum is up 1.5%), and the dollar is marginally weaker against the euro. Bonds remain somewhat weak with the 10-year yield now approaching 3%. Jobless claims came in a tinge better than expected. Pending Home Sales (0.0%) are due out at 10AM. Trichetâs comments this morning came in pretty much as expected as he warned of slower growth in Europe but did interestingly not give specifics as to what lies ahead. Retail sales data came out strong for a host of companies. This mix is leading to a slight uptick in stock prices although futures are off of their highs. For the day, most will be looking for profit taking; I am not so sure this will happen as the strength this morning continues to be quite evident. Should the market open higher and fail to break back initially, look for some short covering on fairly high turnover. The middle of the day will likely be slow, but ahead of the jobs report tomorrow, trading will likely slow a bit although the strength likely holds pending a major news event. The focus will likely be on the myriad of retailers with sales data out this morning (ANF, JCP, et al), the earnings plays, biotechs in the news (such as SQNM), relative strength plays on A-B-A2s, and commodity 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 APKT- closed near a high for a 2nd day after posting good earnings OVTI- closed near a high after posting good earnings AGU- closed near a high FCX- closed near a high DECK- closed near a high MA- closed near a high PSS- great earnings FNSR- decent earnings ARG, URBN - featured on âMad Moneyâ last night PUDA- closed near a high RHT- closed near a high HSFT- closed near a high TGT- decent same-store sales M- raised earnings guidance ANF- great same-store sales results IACI, LINTA- announced that Liberty had exchanged its entire stake in IACI for a combination of operating assets and cash in a transaction intended to be tax-free to Liberty and IACI WBD- PEP to acquire 66% of WBD for $33/share JCP- decent same store sales KSS- decent same store sales Bad-The following stocks have bad news and/or a weak technical pattern SCMR- closed near a low after posting awful earnings APWR- closed near a low after posting awful earnings MCOX- closed near a low for a 2nd day after posting awful earnings UTI- closed near a low after posting awful earnings SODA- closed near a low NFLX- closed near a low TTM- closed near a low ARO- poor earnings SNPS- poor earnings JAS- poor earnings SMTC- poor earnings ZUMZ- poor earnings SQNM- share offering NFLX- featured negatively on âMad Moneyâ last night RBC- warned on 4th quarter and announced acquisition of Unico Earnings: THURS DEC 2 BEFORE DLM GIL KR TOL UTIW THURS DEC 2 AFTER AVGO CWTR FNSR NOVL PAY PVH Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President