So what happened late yesterday afternoon? In a nutshell, Reuters reported that the Obama administration was attempting to create an entity which would subsidize mortgage payments for homeowners who are financially in trouble, but not delinquent yet. The programs that exist currently only provide assistance to borrowers who are already in arrears on their mortgage. Under the ever-changing plan, homes would undergo a standardized reappraisal with current homeowners facing a uniform eligibility test to see if they qualify for aid. On Thursday, Treasury Secretary Geithner told the Senate Budget Committee that the Obama administration would attempt to put together a package which uses “a mix of incentive and persuasion” in an effort to get mortgage entities to re-do their loans and provide relief for more homeowners. Thus, the plan in theory is trying to give some sense of benchmark for values and if it can be done on a sustained basis, the markets can definitely rally around it. Why? It’d force people to reprice bonds, view credit risk differently, and provide an ephemeral floor at a minimum to the housing market which would potentially get the housing market going again. This is a great idea in theory, but in practice, who really knows how much money it will take, how fast can a test be set up, and will it halt home property values from falling? These are certainly questions over my head. But the reason the markets rallied is on the hope that something like this plan can work simply put. For day traders, yetserday was but one more example of why one cannot be a permabear or a permabull intra-day anyway. It is very very easy to get caught up sticking with what one thinks rather than what one is viewing. Also, it shows once again the importance of having an outpoint when wrong. Looking ahead, it certainly is a schematic to monitor because any rumors (or facts that leak out) about this infant plan can cause wild swings in the market today in particular as some people take a four day weekend and/or leave early.
Markets throughout the world bounced overnight. Asian markets were up 1%-2% with similar gains in Europe. Oil is flat, the dollar is losing ground, and bonds are slightly weaker as well. Futures are mildly positive early this morning. The bounce yesterday was on low volume on rumor…not really a sustainable bounce…unless there is a deserved catalyst for it. With that in mind, people will be a little reluctant to sell into the bounce in the immediate-term simply because of momentum. I know. Circular logic. But this is the way it works. Thus, the net of all of this is that today will likely be a relatively low volume choppy day driven by rumors and politics ahead of bills to be signed by president Obama and a G-7 meeting over the weekend. Most action will likely take place in the first hour or two with increasingly thin trade as the day progresses as traders gear up for an extended weekend.
Watch list:
2132009Eriklist.zip
Reiterating-
Please understand that if the ideas do not get to the hoped for set-ups cited below, more often than not, one should not blindly trade the symbol next to said idea.
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
CEPH- raised earnings guidance, but cut revenue guidance
MFE- warned slightly for next quarter, but better than the whisper number
VCLK- great earnings
PFG- closed near a high amid a reversal
ASIA –closed near a high
BWA- closed near a high after posting earnings Thurs morning
BWLD – closed near a high after posting great earnings Wed afternoon
ALXN- closed near a high
KO- closed near a high amidst great earnings
CF, MOS, POT, MON—among fertilizer stocks closing near their highs
GDI- good earnings
AIPC- closed nears it high after posting great earnings
BKE- closed near a high
WSH- closed at an intermediate-term high after posting great earnings
RACK- beat earnings estimates and announced stock buyback
BBND- good earnings
YRCW- announced agreement with it lenders in restructuring some of its debt
NITE- CEO on “Mad Money” and stock got rated positively on show
ANF- good earnings for the quarter
PEP- good earnings
CTSH- great earnings
PALM- broke out to a new trend high yesterday morning and started with a buy recommendation this morning at Oppenheimer
Bad-The following stocks have bad news and/or a weak technical pattern
INSP- closed near a low
GERN- planning on doing a secondary offering between 6.60 and 6.85
WFC- taking $328 million charge for 4th quarter…completely unexpected
REV- closed near a new trend low
OEH- closed near low of day
SVNT- FDA delayed a decision on SVNT’s product
CSR- announced $125 million offering in an S-3…except that it seemed to be an update of a filing from November…if this is correct, stock could bounce hard
ITMN- selling 2.5 million shares between 15.80 and 16.35
LPHI- mentioned negatively on “Mad Money”
Earnings:
FRI FRB 13 BEFORE
ANF BAM CTSH
ENB MFA NAT
OGE PEP WYN
FRI FEB 13 AFTER
CCJ SPF
Good luck today.
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist of Epiphany Trading, LLC
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