WED. APR. 28- Trouble In Europe Europeâs problems finally became a bit of a problem state-side for the American stock market yesterday. For the first time since the debut of the euro in 1999, a euro member lost its investment grade status as Standard and Poorâs cut its debt rating three rungs to âjunkâ status. The move ostensibly puts Greek debt at the same status as bonds issued by Azerbaijan and Egypt. What sunk European stocks in particular yesterday (stocks throughout the continent fell 3% to 4% across the board) was a downgrade of Portuguese debt as hinted at in yesterdayâs blog. There has been a school of thought that besides the decent economic recovery the United Statesâs economy is trying to make, the American stock marketâs rally has been aided by inflows from European money. I mean, if I am a relatively wealthy Greek shipping magnate and I am afraid of the direction of my own countryâs debt and equity securities much less worried about the rest of Europe, the United States looks like a pretty good investment conduit for my funds. Of course, that can artificially drive up a market, but it is of little consequence if I want a little risk and donât want to hold my monies in say, the National Bank of Greece. The counterargument is the contagion side- that is the side that reared its ugly head yesterday. For perspective, the U.S. two-year Treasury note has a yield of about 1%. Itâs bad enough that the yield on the Greek two-year note topped 18% yesterday, but the two-year in Portugal surged to a 5% yield as well. Furthermore, there was a decline in the bonds of such nations as Ireland and Spain. This in turn led investors out of many investment vehicles with oil down over 2%, copper 4%, aluminum 7%, and American stocks about 1.5%. Combined with the Goldman hearings, appetite for risk declined markedly yesterday as financials and techs tumbled across the board (although GS finished ahead marginally on the trading session). The thing to keep an eye on in the immediate-term is Germanyâs reaction to this as the crisis is intensifying and along with it, the euro. It is a precarious situation because if Greece, Spain, Portugal, and even Ireland begin having serious problems, it marks down the euro and itâs anybodyâs guess what could happen. And this, kids- this is where day traders come into play as stocks become more volatile (the VIX was up over 10% yesterday). So, although we are in the waning stages of this quarterâs earnings season, it looks like stock prices will be much more erratic in days to come with a focus on Europe. Markets in Asia were hit very hard overnight with Tokyo down 2.6% and Hong Kong 1.5%. In Europe, prices were sharply lower but came back as an EU spokeperson said that negotiations with Greece were on track. Markets in places like Germany were down almost 2% intra-day but as of this writing, the DAX is down only ½% and the FTSE in London is actually marginally higher. The euro is actually the strongest currency intra-day right now with the dollar down nearly a euro although up a yen. Futures were initially lower with stocks like AAPL down three points around 5:30AM, but trading nicely higher now as the euro has strengthened. For the day, everything hinges on the euro. As long as the euro is stable, look for a nicely higher open followed by a bit of a dip by some nervous longs. The ferocity of the dip will set the tone for the day; if it is strong, trade relative strength. If not, look for an A-B-A2 to the upside. 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 BRCM- decent earnings DFG- decent earnings LIFE- decent earnings ISSI- good earnings MOLX- decent earnings NSC- decent earnings CSII- received FDA approval for Orbit II coronary clinical trial RFMD- decent earnings DTG- decent earnings GLW- decent earnings OC- decent earnings TEL- decent earnings TMO- decent earnings ROK- decent earnings RCL- better than expected earnings guidance Bad-The following stocks have bad news and/or a weak technical pattern X- closed near a low after posting earnings CLF- closed near a low FORM- closed near a low after posting earnings UIS- closed near a low after posting earnings FTBK- reversed in closing near a low ASFN- reversed in closing near a low AIG- closed near a low PRU- closed near a low NOV- closed near a low AMP- closed near a low MAS- closed near a low CAS- closed near a low CREE- closed near a low NARA- closed near a low CAAS- closed near a low NTY- closed near a low after posting earnings IBM- closed near a low despite announcing an increased stock buyback PNRA- poor earnings AMAG- poor earnings PNC- Treasury Department announces public offering of warrants to purchase common stock RHI- terrible earnings WBSN- poor earnings BWLD- terrible earnings MTW- poor earnings HTCH- terrible earnings CNXT- poor earnings JST- terrible earnings FLEX- poor earnings PMTC- poor earnings AMKR- poor earnings PFCB- poor earnings Earnings: WED APR 28 BEFORE ABX AOL ATI BCRX BEN BRY CMCSA COP CP DOW DTG EQT GD GLW GT HES HST IACI IMA JBLU MHS MSO NOC OC PFCB PX ROK S SAP SEE SLAB TEL TMO VTR WLP WED APR 28 AFTER ACE AKAM ALL AVB BEC BIDU CCI CERN CLF CML COG CVD EQR ESRX FSLR FTI GG GMCR HRS ILMN ITRI KRC LNC NFX NLY NTRI OI OII OIS OKE RE RYL SKX TSRA V VAR VRSN WLT XLNX 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