OK. This one may sound a little out there, but stick with me. And I must credit one of my best friends for putting the concept of this piece in my cranium. A little background first: a recent survey of money managers I saw (and I cannot find the Internet link so I apologize ahead of time for lack of citation) indicated that 52% of those individuals thought the market would be up 10% or more this year. More specifically, there has been seemingly endless chatter of a ‘honeymoon’ rally ahead of President-Elect Obama’s presidency. Forget the fact that when the majority is on one side of the fence, the opposite of the groupthink tends to happen. But here is a wild thought: it is in Obama’s best interest to dampen expectations for two reasons. First, if things go badly in the first few months of his presidency, he can claim that he warned all of us. Second, the lower that the market closes on January 20, 2009, assuming we eventually get an economic recovery, the bigger the percentage gain that Obama can claim happened during his presidency! For instance, if the Dow fell from 8800 to 8000 between now and Inauguration Day, a move back to 8800 would allow for a 10% gain during his tenure! Witness the fact that every time he comes on television or the radio, Obama downplays the economy. As a best case, this talk certainly puts at least an ephemeral ceiling on the market and at worst, the market keeps drifting lower. For day traders, that aforementioned sentence is the most important point of this piece. The amount of the hedge fund selling has notably died off, but there does not seem to be a lift here either so continue to be very nimble and do not overtrade as this is an environment tailor-made to churn some activity.
Watch list:
1092009Eriklist.zip
Markets in Asia were generally lower about 1% overnight excepting Australia which was up a little. Markets are largely within striking distance of unchanged in Europe. Oil is down, the dollar is down slightly, and bonds are in-line. All are on pins and needles for the jobs report today. And truth be told, I am not sure it will have a gigantic impact. If the number comes in worse than expected, it is probably factored in because markets are expecting one of the worst numbers of the post WWII era. If the number is better than expected, most traders won’t believe the number. Thus, I go back to what I always go back to- the action of the market. The tape shook off two Ponzi schemes and the Wal Mart earnings miss yesterday. Thus, it’d seem that while upside is capped out of fear of what is out there, the selling pressure seems to be limited as well. Thus, barring a major surprise one way or another with this number, look for a relatively quiet Friday, but one likely to have a bit of an upside bias going strictly off yesterday’s activity. Ah, the peril of getting this entry out as early as possible…
Reiterating-If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf 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
APOL- great earnings
HWAY- good earnings
I.HS- good earnings
PALM- way up on buzz about technology; if it opens higher, may well be a short
ANDS- way up yesterday on positive drug news; looking to buy thru 4.29 Thurs high if it gets there
SGR- strong on great earnings yesterday; will look to trade on an A-B-A2 off of the open
ARTC- continued its recent run-up yesterday; look to buy thru 8.50 Thurs high
CVC- rallied on news of debt offering yesterday thus it gets some new seed capital; looking for buy thru 19.36 Fri high
NIHD- recent rally continues; looking to buy thru Thurs 24.49 high when/if it gets there
LCAPA, LBTYA- among the small media stocks rallying yesterday; if momentum present, looking to buy thru yesterday’s highs (6.28/19.78 respectively)
WFMI- up on disclosure of stake by Ron Burkle
ORBC- sharply higher in closing on high; would love A-B-A2 off of open if it opened higher
CBI- among industrial stocks rallying yesterday; looking to buy thru Thurs 12.17 high
YRCW- announced settlement with Teamsters which will allow it to save a tremendous amount of money for several years to come
CAT, ITW- on “Mad Money” last night
Bad-The following stocks have bad news and/or a weak technical pattern
OREX- achieved positive phase III results; the stock popped to almost 8 after-hours, but them tumbled. Still seeking color as to exactly what happened, but it will be a feature to be certain. News seems to be positive on the surface, but clearly something wrong here
HNSN- warned on earnings after-hours
COH- pre-announced bad earnings
ARG- warned on earnings
BPZ- announced it is discontinuing its partnership with Shell
GBX- missed earnings
RRD- warned on earnings
SWKS, CIEN, TLAB, AMD- on “Sell Block” segment of “mad Money” last night
Earnings:
FRI JAN 9 BEFORE
GBX KBH MXB
Good luck today.
http://www.epiphanytrading.com/
Erik R. Kolodny- Chief Markets Strategist of Epiphany Trading, LLC
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