MON. JUN. 7- Hungarian Woes On Tuesday night, I ate some of the best Hungarian goulash that Iâve ever had. If it is done the right way, it is one of my five favorite meals (even if I do desecrate it by eating low fat meat and a healthy serving of veges on top- donât worryâ¦just frozen peas and carrots, but heyâ¦gotta get some vegetables in). I rarely eat it; in fact, this was the first time in over three years Iâd had it. Little did I realize at the time that a much more unappetizing version of Hungary would present itself merely 2 ½ days later. After awakening to a mildly positive futures outlook around 5AM on Friday morning, things stayed relatively placid until a sudden seemingly random drop around 7AM. Two stories broke. The first was a rumor that SocGen had unaccounted for derivative losses. The second really caught my eye. Namely, credit-default swaps on sovereign bonds in many European nation surged early Friday morning after a spokesperson for Hungaryâs prime minister (Viktor Orban) noted that the nation is in a âvery grave situation. He went on to say that talk of a default in Hungary is ânot an exaggerationâ because a previous administration had âmanipulatedâ figures. Now, Hungary is a relatively small European entity (in fact, itâs GDP would rank it around 25th among the 50 U.S. States). But investors took every negative connotation possible out of those comments. I mean, really. What would happen to a company if a spokesperson for a CFO noted that the previous CEO and CFO had committed massive fraud? Well, this is an entire sovereign nation! This sparked swaps on government debt of Portugal, Spain, Ireland, Italy, and Greece to rise anywhere around 10% on average. The new worry became not only is the situation worsening, nobody knows in fact if there has been a masking of how bad it is elsewhere. A whole new wrinkle. Thus, itâs not so much the crumbling of the 50th largest economy on the planet that has people worried, but moreso of âwho is nextâ and will bets begin to be stacked on much bigger nations suffering the same fate now rather than later? The euro crumbled to below 1.20 on Friday as a result and set off another round of hedge fund selling of equities. A very poor jobs report (more on that in another blog post at a later date) did not help matters as doubt for a recovery began to be sown a bit more aggressively state-side as well. As the week starts, we need to keep our eyes on Budapest, Madrid, and Lisbon rather than Tokyo, New York, and London for definitive clues of where the crisis lies as soaring credit default swaps donât bode well for any European nation. Markets in Asia were hit very hard overnight with Tokyo down 3.8% and Hong Kong off 2%. This led to the euro trading below 1.19 and Dow futures off about 140 last night. However, the trend shifted a little early afternoon in Europe as the euro rebounded a bit back into positive ground; after opening sharply lower, the bourses are only down about 0.5% on average. Oil is also up slightly reversing heavy losses overnight. The news flow was slightly mixed over the weekend. BP noted they had been able to stop the flow of oil a bit more yet there was nothing new out of the G-20 conference. But with some shot covering (maybe government intervention?) in the euro, the futures are trading at their highest level of the morning as of this writing. With everything going on, donât look for the strength to hold. Expect a bit of selling back to the unchanged level which could accelerate simply because of where the futures were and the fact nothing major has changed although the strength in AAPL and AMZN much less BP will help mitigate any major decline in all likelihood.. The key will be if we can hold mid-morning. If so, expect a little rally into the noon hour. At 1PMish ET, AAPL will release its new device with the stock likely leading the market for the duration of the day. Focus on big caps with hyperfast conditions as well as the myriad of small caps and bigger entities with news particularly the ones from the ASCO. 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 CMTL- closed near a high after posting decent earnings BP- according to the company, they are gradually halting the flow of new oil from the Gulf well; RIG will likely move in sympathy BMY- positive data from its Ipilimumab skin cancer trial released at ASCO; also upgraded at Goldman Sachs VVUS- positive phase III test results for its Avanafil released at ASCO KRY- signed biding agreement with China Railway Resources to create a strategic partnership for a gold project in Venezuela CELG- positive phase III Revlimid results released at ASCO TLCR- being acquired by Grifols for 19 in cash plus .641 shares of Grifols (valued at 26.06 as of Fridayâs close) PARD- positive phase III Spear Trial of Picoplatin released at ASCO ARQL- positive phase II results released for ARQ 197 at ASCO AMZN- upgraded by Goldman Sachs BSDM- positive phase II clinical study results on its pancreatic cancer drug Bad-The following stocks have bad news and/or a weak technical pattern AAPL, AMZN- closed near a low BIDU- closed near a low BP- closed near a low BUCY, NBL APC, DO, ATPG- closed near a low SWN, DVN, RRC- closed near a low MA- closed near a low CLF- closed near a low FCX- closed near a low UAUA- closed near a low PNC- closed near a low CF- closed at a new trend low MET- closed near a low GAP- closed near a low DCTH- negative phase III results released at ASCO from its PHP drug APPY- negative update on its AppyScore FDA 510k filing OII- lowered earnings guidance Earnings: MON JUN 7 BEFORE None today MON JUN 7 AFTER FCEL PBY Good luck today. Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President Joseph R. McCandless- Managing Partner D. Timothy Seaquist- Managing Partner
TUES. JUN. 8- "Jobs" Report Last week, I noted in this space that both President Obama and Vice President Biden made positive comments about jobs growth in the United States. The implication was that the number coming from the unemployment report last Friday was going to be strong. This speculation led to a nice intra-week really which saw the benchmark averages all rally between 2% and 3%. The initial number of 431,000 jobs created to the naked eye sure does look good and certainly (with the gift of hindsight and a little smarmy politics) seemed like a positive light last Wednesday. Yet, when put under a microscope, it just doesnât look good. First, the Reuters forecast of economist provided an estimate of 513,000 net jobs created. More important, of the 431,000 jobs created last month, 411,000 of them were ephemeral- the governmentâs hiring of temporary census workers. Even the worst math students among us can rapidly see that there was actually tiny jobs growth in the private sector- and way under estimates at that! Lessons learned: a) Politicians (from every political persuasion) will say whatever sounds good. Just because Obama and Biden were so forward last week did not mean it was a cause for celebration. B) People seem to be looking for one major turning point in the jobs market. It just is not likely to happen as whatever growth is occurring in the economy is much slower and more gradual than it has been. C) Finally and most important for day traders, the reaction to the report indicates just what a treacherous yet potentially opportunistic trading environment we are in. The volatility remains quite high. Such will be the case for the next few jobs reports as the focus will continue to be on whether Lucy will finally let Charlie Brown kick the football. Make sure- particularly on days like last Friday- you have a true understanding of exactly what the numbers mean and why stock prices reacted the way they did to said numbers. Markets in Asia defied the worldwide trend in closing higher following comments from Fed Chairman Bernanke that the economic recovery in the U.S. was still intact although itâd need to accelerate if jobs are to be created. But the key takeaway was a positive reiteration of how things were going thus Tokyo inched ahead 0.2% with Hong Kong up 0.6%. Dow futures traded ahead 110 at the height of the hope. That hope was dashed when ratings agency Fitch issued very cautionary comments on Englandâs debt situation in noting that England must accelerate its budget constraints. That put the fear of the contagion spreading to England back on the table which has caused the bourses to be trading down ½% to ¾% across the board. Futures completely reversed although with currencies quiet, theyâve bounced back a bit indicating a slightly stronger open. Big cap tech and financials are showing strength across the board. Thus, look for a little selling into the rally initially as, well, that is expected. But just as futures were sharply lower overnight Sunday, the strength overnight portends a likely rally later. Thus, I am playing it second-to-second, but looking for a slight grind higher as the day progresses with a focus on big caps, retailers off of some earnings and same-store-sales and relative strength plays on an A-B-A2 should the market sell off a little just after the open. 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 AONE- signed battery system supply agreement with NAV DRRX- signed licensing pact with Hospira DEPO- received a $10 million milestone payment from ABT for its DM-1796 medication to treat pain after shingles ARMH- mentioned on âMad Moneyâ last night DG- decent earnings TLB- decent earnings Bad-The following stocks have bad news and/or a weak technical pattern PBY- poor earnings GS- closed near a low RIMM- closed near a low AMZN- closed near a low AAPL- closed near a low after unveiling its new generation iPhone FCX- closed near a low RIG- closed near a low DNDN- closed near a low after not announcing anything surprisingly new at ASCO DCTH- closed near a low after presenting disappointing results at ASCO WYNN, MGM- closed near a low SLB- closed near a low ANR- closed near a low DVN- closed near a low CLF- closed near a low X- closed near a low FSLR- closed near a low WX- Jana Partners bought 7% of CRL; opposes WX acquisition of CRL CLDX- closed near a low after presenting data from a phase II study at ASCO VECO- closed near a low ETFCD- closed near a low CREE- closed near a low Earnings: TUES JUN 8 BEFORE DG TLB TUES JUN 8 AFTER NAV OXM PLL TTWO Good luck today. Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President Joseph R. McCandless- Managing Partner D. Timothy Seaquist- Managing Partner
WED. JUN. 9- Markets Never Sleep Many traders falsely think that the trading day starts at 9:30AM ET and ends at 4PM ET. In countless ways, they are mistaken. The specific tenet I have in mind today is that due to the trading of futures, there is ostensibly constant movement time-wise much less delta-wise as far as market averages go during the trading week. Futures contracts for those who are not familiar with them are ostensibly instruments that allow you to predict the next blip of the market without putting up a lot of money yet the derivative of the average carries both high risk- and high reward. The action is inevitably always worth watching, but has been particularly relevant the last two trading days. On Sunday night around 11:30PM with Asian markets selling off and the euro breaking down that much more, near-term Dow futures were down around 130 points. Yet the market barely opened lower as Monday morning post-NYSE 9:30AM trading commenced. The market felt heavy with many stocks giving way (such as AAPL in the afternoon) and futures were drawn to Sunday nightâs low with the major averages following along closing almost exactly at the midnight lows. Guess what? Around 1:30AM on Monday night into Tuesday morning, the Dow traded ahead 110 points futures-wise. Yet, the actual NYSE open was much lower. As the day progressed yesterday, many of the generals gave way with stocks like AAPL and GS tumbling in the late morning. Many of the major averages, however, held fairly well amid strength in such sectors as the copper stocks. And like a magnet as the day soldiered on the Dow in particular rallied right back to the high of the overnight futures. Now, is this going to work every day? No. But it works a tremendous amount of the time- often enough that is always well worth knowing the overnight ranges of the futures on all of the major indexes. The deltas of the move intra-day may be more or less than the overnight range, but certainly at a minimum, knowing these ranges certainly can give you an idea of how much and where stock prices can go during any given trading day. Markets were mixed in Asia overnight with Tokyo down 1% but Hong Kong ahead 0.7% after positive economic news out of China (with the Shanghai market putting in a near 3% rise). European markets are slightly higher across the board with the euro recouping the 1.20 level. Oil is up almost 2% with gold down 0.5%. Futures after trading in a much more choppy manner albeit lower much of the night are now indicating a decently higher open with mild strength in an array of sectors. For today, look for another choppy session; it is imperative to see if the generals such as AAPL and GS can hold earlier on as they will likely tell the tale of the day. It will likely be a narrower range day and a more muted session at that. Focus on the oils, the relative strength/weakness plays, and the myriad of stocks in the news as those will also be moving most of the 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 TTWO- decent earnings OXM- decent earnings FCX- closed near a high WYNN- closed near a high JOYG- closed near a high SLB, ANR- closed near a high DVN- closed near a high CLF- closed near a high JPM- closed near a high FCH- repaying debt at substantial discount and its RevPAR was up sharply in May CERP- closed near a high after announcing a significant rise in shipments of product WFT- mentioned on âMad Moneyâ last night DO- noted that rumors of an oil spill from the company were false AVB- boosted earnings guidance ECLP- being acquired by MDRX in a stock swap deal for 1.2 shares of MDRX for each ECLP PIP- U.S. Government Accounting Office denied competitor protest of SparVax contract modification TXN- decent earnings guidance REGN- announced Arcalyst met primary and secondary endpoints for its phase III trial of prevention of gout flares PLL- decent earnings POT- upgraded by UBS Bad-The following stocks have bad news and/or a weak technical pattern CLDA- share offering TIVO- closed near a low after losing its appeal in the DISH patent case NWY- closed near a low after warning on its 2nd quarter outlook Earnings: WED JUN 9 BEFORE CIEN MTN NAV WED JUN 9 AFTER MW SHFL Good luck today. Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President Joseph R. McCandless- Managing Partner D. Timothy Seaquist- Managing Partner
THURS. JUN. 10- Being A Zero When I was younger, I would make an annual sojourn to the NYSE and then into mid-town Manhattan with my father. I was developing whatever knowledge base of trading I now possess and miss those visits more than anybody can begin to imagine. One of the more striking things that stuck with me all these years was the very brief conversation I had with an old-timer at a Charles Schwab outlet on 6th avenue near the present-day Fox News studios. I loved the action back then. Loved it. Had to be in a position. This one guy was sitting there watching me with a mixture of bemusement, annoyance, pity, and self-confidence. He watched me place three or four orders on my dinosaur of a cell phone at the height of 1993 technology. He asked me from a bench with one eye on the scrolling electronic ticker tape what I was doing. I told him. He asked how I was doing. I said Iâd lost a little bit on the transactions and that I was ostensibly spinning my wheels. He then told me âKid, itâs better to be a zero than a loser,â and then walked out of the office. It took me a few years and a few well-deserved grey hairs to understand what he was saying. First, ones doe not have to be in a position at all times. More importantly, it is much better not to tread water than to lose money. Namely, if youâre not sure what to do, donât do anything. Why tempt fate? There are always going to be opportunities (obviously many more in these times than others), but the chances to garner a living will be there if you wait for your spots. So particularly in these volatile times, if youâre not sure *exactly* what to do at any given moment, why push the financial gun known as a âbuy or âsellâ button? Markets overseas were higher overnight with Tokyo up 1% and Hong Kong up marginally on continued momentum about Chinaâs recent comments about its economy. European markets are up about ¼% to ½% across the board with Germany relatively strong and Britain relatively weak. The euro and oil are slightly higher with gold slightly lower. The flavor of the day today seems to be positive comments out of BP regarding their financial position as well as a positive response to a bond offering in Spain. The well-received Spanish bond auction took a little fear out of the market and a jolt in futures with everything expected to open higher. For today, the key sector to watch once again centers in the oil patch with BP, APC, and RIG particularly in focus. Itâs also worth noting that the main generals of the bull market of the last year- AAPL and GS- have both weakened in recent days so watch those two stalwarts. Other than that, focus on anything notably relatively strong or weak as compared to the broader tape particularly early on in accordance with the âhyperfastâ paradigm Iâve set forth in the past. 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 PBTH- closed near a high MW- good earnings SHFL- good earnings WFMI, HAIN, CMG- featured on âMad Moneyâ last night APWR- decent earnings Bad-The following stocks have bad news and/or a weak technical pattern BP- closed near a low although this morning they did issue a statement reiterating the strong cash flow of their business and that they saw no reason for yesterdayâs sell-off APC- closed near a low RIG- closed near a low DO- reversed in closing near a low IMA- closed near a low after posting bad earnings a couple of days ago in a continued decline RMBS- closed near a low on patent lawsuit worries BIDU- closed near a low DCTH- continue to decline in closing near a low following poor news at ASCO AAPL- closed near a low in a continued sell-off after the iPhone presentation from Monday Earnings: THURS JUN 10 BEFORE APWR DLM LULU THURS JUN 10 AFTER FNSR NSM Good luck today. Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President Joseph R. McCandless- Managing Partner D. Timothy Seaquist- Managing Partner
FRI. JUN. 11- Investing Vs Trading Somebody recently made an appearance in the middle of the day in our chatroom and asked why the drillers were up on the session. Letâs forget the fact that serial perpetrators of randomly appearing at work at random times indicate (to me anyway) a complete lack of preparation much less chance of succeeding at a trading career. The more important thing here over and above the lack of doing any homework whatsoever is an ability to understand how trading works. And this goes for many people (including myself in the early part of my careerâ¦much less at the present at times!). Yes, there was of course a specific reason why the drillers happened to be rallying that particular day (which was discussed on that morningâs blog, forum, and morning call). It should be known and not asked at 9:39AM ET so as to be properly ready. But overall and above the ignorance, even if you don't know what is going on, why would anyone fight the tide? Even if you think that the entire Gulf of Mexico will be engulfed with oil before this mess is over with, if the rig stocks much less British Petroleum (BP) are rallying on any given day and you are a day trader, you will lose heavily if you short the stocks as they rally intra-day. There is a huge difference between investing (you may be right over the long-run) and trading (you can be very wrong over the next two hours or two minutes). Thus, this is but one real-life example of suspending any sense of disbelief; the numbers reflecting where stocks are trading tell the true tale- always. Markets overnight rose throughout the world on the heel of the strong gains on Wall Street yesterday. In Asia, Tokyo was up 1.7% with Hong Kong ahead 1.2%. The gains arenât quite as fierce in Europe as markets rallied with Wall Street into their close yesterday; gains range from 0.2% in Germany to 0.8% in London. Oil is down almost 1%, gold is flat, and the euro is marginally stronger against the dollar following a good day yesterday for the euro. In the U.S., futures were down modestly most of the overnight, but the losses accelerated after horrible retail sales data this morning. For today, look for some profit taking overall after the big gains of yesterday in a relatively narrow range on low volume. Most of the action will take place in the morning as traders leave early for the weekend with a focus on the drillers and the big caps. Fairly vanilla, but with little news flow, thatâs how it is 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 NSM- decent earnings FNSR- decent earnings BP, APC, DO- closed near a high in a very nice rebound POT- closed near a high AAPL- closed near a high BHI, SII, SLB, FTI â closed near highs SWN, RRC, DVN- closed near highs BUCY, JOYG- closed near a high CAT- closed near a high APA- closed near a high SYUT closed near a high after posting great earnings ARST- good earnings FCX- closed near a high CLF- closed on a high WYNN- closed near a high WEN- Nelson Peltz considering proposing an acquisition transaction of Wendyâs/Arbyâs BGH- to be acquired by BPL at a ratio of .7 share of BPL for each BGH share which values BGH at around 41 Bad-The following stocks have bad news and/or a weak technical pattern GS- closed off of its low, but never got traction yesterday DELL- established a $100 million liability fund to help settle litigation brought against it by the federal government some time ago Earnings: None today Good luck today. Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President Joseph R. McCandless- Managing Partner D. Timothy Seaquist- Managing Partner
MON. JUN. 14- Being Aware of Everything...And Your Mindset I feel like Iâve discussed my 20 cent rule and the idea of liquidity quite a bit over the last several months. But based on what I was seeing in our chat room the last couple of days, I want to readdress both issues from two different angles. First, the key word as is so often the case is âdiscipline.â One must pick a style and stick to it- whatever it is. In a whippy market, however, it is very difficult to hold positions. Furthermore, if exiting quickly, most of us (with me at the top of list) will be jiggled out- right or wrong- in the immediate-term if âimmediateâ gratification isn't granted. So many times, we discuss the trades which kept going. What we donât discuss often enough are ideas like UFS one Wednesday afternoon a couple of weeks ago. It was first called out at 1:15PM or so. The stock breached its high y a few cents and then came back in before hanging out for about 15 minutes on low volumeâ¦and then rallied almost a dollar over the course of the next half hour. So, speaking for me, Iâd have lost small because it didnât go anywhere immediately. It was then called out again around 45 minutes later around 72 when it was just off of its high. The stock fell 50 cents on nearly non-existent volume in the next few minutes (and almost two points over two hours). Thus, if one plays the philosophy of holding things, one did well the first time if one wasnât jiggled out, but would have been demolished the second time. If one played it for an immediate-term move, I know I for one would have been jiggled out and would have been crushed the second time because of low liquidity. In another example, PURE was called out just before 2PM. It immediately blipped higher before falling slowly and then leveling out. Thus, I definitely would have lost because of the initial blip as there is a lot of noise when a stock does not have the potential to move at least 20 cents easily yet holding it would not have worked either as it closed higher than the suggested short price by the person who called it out. Realize- there is a reason I list seven criteria as part of the Epiphany Method. Just because a stock is touching a high or a low shows it has momentumâ¦but it certainly is not necessarily going to be a successful conduit for trading if it cannot move easily nor if it is particularly easy to enter and especially exit liquidity-wise. Markets in Asia were broadly higher overnight with Tokyo ahead 1.8% and Hong Kong up 0.9% albeit on low volume due to holidays in China and Australia. Prices are higher in Europe as well with the DAX up 1.2% as of this writing and the FTSE up 0.7% (despite a 4% decline in BP). The euro is still in the midst of a mini-run with that currency topping 1.22 to the dollar. Gold is up slightly with oil up a sharp 2%. The net of all of this is some respectable early strength for the futures although prices are off of their highs. Itâd seem today should be a fairly routine stereotypical Monday. Look for low volumes and high illiquidity in slow trade with prices not straying exceptionally far from unchanged. The upside bias is likely to stay in effect with a focus on some A-B-A2âs in the big caps and .some news in a few pretty big biotech names. 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 RIG- closed near a high AAPL- closed near a high PWRD- closed near a high WYNN- closed near a high X- closed near a high ULTA- closed near a high after pricing a share offering at 22.25 NLST- closed near a high after Viglen approved NLSTâs Hypercloud memory for HPC applications NSU- closed near a high IDT- closed near a high after posting good earnings TBL- closed near a high Bad-The following stocks have bad news and/or a weak technical pattern QCOR- FDA delayed Acthar indication decision CHBT- closed near a low after issuing poor earnings HGSI- FDA issued discipline review letter re the risk/benefit assessment of Zalbin being dosed every two weeks ONXX- phase III Nexavar trial failed to reach primary endpoint Earnings: MON JUN 14 BEFORE None today MON JUN 14 AFTER LZB Good luck today. Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President Joseph R. McCandless- Managing Partner D. Timothy Seaquist- Managing Partner
TUES. JUN. 15- The 'Circuit Breaker' Update Very quietly lost in the news flow on Thursday (five weeks after the âflash crashâ), federal regulators put new rules into place at an attempt to eliminate another âflash crash.â On Friday, the major exchanges put the new rules into place with five different stocks- EOG, GPC, HDI, R, and ZMH. More stocks will be added this week by the NYSE with the NASDAQ planning on having a full program in place today. It is very important to note that the new rules will only apply initially to the S&P 500 members. The way it works will be like this: trading of any S&P 500 stock that rises or falls 10% or more in a five minute period will be halted for five minutes. Notably, this so-called circuit breaker would not be applicable between 9:30AM and 9:45AM and not after 3:35PM ET. Thus, exaggerated moves can take place unencumbered in the first 15 minutes and last 25 minutes of the NYSE trading session- times that are known for big moves at times. Also, there is no immediate-term plan to change SEC rules about market-wide halts if the Dow fell 10%, 20%, or 30% over and above the existing schematic. There will be isolated stocks which could be affected like this to be sure; for instance, THO (which is in the S&P 400) dove from just above 28 to just below 21 when it was came out with earnings intra-day on Thursday. It will also be quite interesting to see what happens if there is one errant 100 share trade somewhere (I am assuming the stock would be halted) with ensuing reaction thereafter. Obviously, if there is an extraordinary day, these changes could come into pay with many stocks getting halted. However, for day traders, donât expect much to change overall on a day-to-day basis as none of these circumstances are likely to be any more prevalent than the present. While almost no trader likes regulation, the changes could have been much more dramatic than were implemented thus the whole situation makes for good D.C. politics, but not much more than that overall on the vast majority of trading days. Markets were little changed in Asia overnight with Tokyo and Hong Kong both up 0.1%. In Europe, markets are shaking off a BP debt downgrade by Fitch as well as a Greek debt downgrade to junk (which occurred yesterday while U.S. markets were open but Europe closed) with most bourses up about 0.5%. Oil is up another 1% with gold up slightly. The euro is stronger again too. All of this is leading to a respectable uptick in futures. Very impressive microcosm. With CBOE expected to be a strong IPO today, donât underestimate the impact this could have in bringing some confidence back to the markets as well. Barring a meltdown by GS or the drillers, look for the gains to hold today. Focus on the exchanges on the heels of CBOE, the big cap techs and financials, the retailers after BBYâs number, and some of the smaller cap biotechs listed below. 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 ATRC- received FDA 510k clearance for AtriClip IFLG- closed near a high on takeover rumors CBOE- pricing 11.7 million shares at 29 at the high of the expected 27-29 range ZANE- signed several new contracts Bad-The following stocks have bad news and/or a weak technical pattern LZB- poor earnings TRBN- discontinuing development of TRU-015 with PFE FCH- 25 million share offering AAPL- reversed in closing near a low BIDU- reversed in closing near a low BP- closed near a low RIG- closed near a low DO- closed near a low GS- closed near a low V- closed near a low GOOG- closed on a low POT- closed near a low PNC- closed near a low ELY- terrible earnings warning GMR- share offering APOL- closed near a low BBY- poor earnings Earnings: TUES JUN 15 BEFORE BBY FDS TUES JUN 15 AFTER None today Good luck today. Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President Joseph R. McCandless- Managing Partner D. Timothy Seaquist- Managing Partner
Erik,I noticed you list stocks that have technical patterns you like.Is this a new criteria to your star system?If the stock doesn't have news will the pattern suffice?
No re the new criteria. I simply make a list of notable stocks that have news and/or closed up or down 5% or more and closed near their previous day's high or low. If the stock doesn't have news, I will trade it but in much smaller size witout the definitive news trigger as long as everything else is in place. The other reason I list them is that it certainly gives me an idea of where the momentum lies and how things may shake out the next day. For instance, if GS and AAPL closed near their lows on a Monday and then gap open the next day with both filling the gap and trading below the prevous day's low yet the broader averages are still up, it'd give me a red flag as to the (lack of) strength in the overall averages.