TUES. FEB. 10- Don't Forget About The Autos

One issue stunningly seemingly lost in the bank travails has been an update on the automakers. Just like the Joe Torre story got lost in the midst of the A-Rod bombshell over the weekend, the automaker discourse- must see TV in December- has totally stopped. However, what is lurking in the background is that general Motors (GM) and Chrysler LLC may have to be forced into bankruptcy by the U.S. government in order to gain assurance of the repayment of taxpayer money. According to the U.S. Treasury website, U.S. taxpayers actually follow Citigroup, JP Morgan, and Goldman Sachs in the pecking order of debtors to be repaid, but the government has quietly hired a law firm to attempt to push forward to the front of the line for repayment. If the federal government fails to obtain an amenable compromise to change this pecking order, they can force the car entities into bankruptcy so that the firms can get more government aid. Then, the government would likely finance the bankruptcy with a debtor-in-possession loan which would give the U.S. government/taxpayer over the other creditors of the auto manufacturers. In the interim, the automakers are doing what they can to resist the taint of bankruptcy. The next date to watch in this branch of the crisis is February 17. That is the date established as a deadline for the auto companies to show distinct progress with the monies they received from TARP in December. They must reduce labor costs and attempt to show how the monies will be repaid to the government by next month. Furthermore, if the automakers cannot clearly indicate by March 31 that they will be able to begin earning money and repay the loans, the government can call the loans. For day traders, this is but one more black cloud over everything. As noted, the focus has been upon the banks. However, as the market seeks direction, this looming crisis may well bring back some volatility in the coming weeks.

Markets in Asia were mixed with prices in Europe down around 1%. Oil is up sharply in the early going as are most commodities. Equity futures are trading lower, however. The details of the bank plan will be released at 11AM, Geithner will be interviewed on CNBC around noon, and he will hold a press conference later in the day to discuss the plan. In the morning, look for banks/financials to trade modestly higher in defiance of the market. After that, it is almost folly for me to guess with certainty as to what will happen, but the early plan is simply to focus on the banks for the direction of the market. If an A-B-A2 develops to the upside after about 15-30 minutes, the market will likely have a huge rally. However, if the banks begin to sell off, it will get very nasty fast. So, I am sorry for the generic advice, but you’ve got to trade the trend; the most likely scenario is the middle case- a lot of the news is likely factored in, there will be some degree of sell-off, but the weakness should be contained on hope if nothing else for now.

Watch list:
21020092Eriklist.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

MS, GS- continued their 2009 rally yesterday; may both be ‘sells on the news’ if the market does not like the bank plan

ENER- closed near a high

BEC- beat earnings and raised guidance slightly

AFG- beat earnings and raised guidance

BBX- closed near a high

APEI- on “Mad Money” last night

PCX- great quarterly results

PLD- good earnings and actually raised guidance

TRA- good earnings

YGE- beat earnings estimates slightly

DOW- rumors out that the Kuwaiti government may help DOW with the ROH deal
Bad-The following stocks have bad news and/or a weak technical pattern

KFS- warned on earnings; closed near a low

ASF- closed near a low after posting weak earnings

PFG- beat on earnings, but missed on revenue; also, assets under management shrunk a great deal

VRTX- missed earnings slightly

RMBS- a Delaware court ruled 12 patents RMBS has in the Micron (MU) legal dispute are unenforceable

LNCR- poor earnings

CRL- bad earnings

LNC- missed earnings estimates badly

VRGY- warned badly on earnings

CXW- bad earnings

MDC- bad earnings and warned

TTI- terrible earnings

MON- warned slightly

HCP- warned slightly

CBST- TEVA to begin directly competing with a lead CBST product

ENZN- negative drug trial news




Earnings:

TUES FEB 10 BEFORE

ACM ARW ASCA

CVH CXW DTV

ELN EXPD GET

GNW HCP HERO

ICE MDC OMC

PBG PCX PLD

Q TAP TRA

TTI TWTC UBS

VSH YGE

TUES FEB 10 AFTER

AMAT BGC CBG

CERN CF CHH

CSC DEI FIS

MVSN NFP NSR

NVDA PL SVR

VFC XL


Good luck today.

http://www.epiphanytrading.com/

Erik R. Kolodny- Chief Markets Strategist of Epiphany Trading, LLC