So, let’s try to hash out what happened yesterday. I gave a brief preview in yesterday’s markets section should you want to re-read yesterday’s piece, but it comes to two old but important bugaboos: GM and the banking sector with one old theme of government intervention. Let’s do GM first. There is now a growing realism that the world will not know GM as is without government intervention. So, the two choices are: GM goes out of business taking with it a significant segment of the American workforce (auto parts suppliers, et al) or staying in business with Uncle Sam (oh, you and me of course) become a conduit to subsidize GM. Yeah, I don’t think either choice is particularly good either. But going with what will likely happen- the government eventually is going to take a bigger role here. With President Obama’s promise yesterday that the U.S. government will guarantee warranties of new vehicles bought from Chrysler and GM in an effort to boost sales/confidence, indeed billions of dollars have already been committed. Now, the auto task force sponsored by the government did withhold further funding until a better restructuring plan is levied, but the reality is that the U.S. government may be thrown into even worse shape by making GM the next Amtrak. In the interim, on ABC’s “This Week” Sunday morning show, Treasury Secretary Geithner noted that “Some banks are going to need some large amounts of assistance.” The Treasury, according to Geithner, has only $135 billion left of the TARP fund and gently hinted that he may have to go to Congress to seek more funds. He also noted that the big risk is that the government does too little than too much here. The markets (correctly in my opinion) focused on the first part of this. Now, let’s think about this: the market began rallying three weeks ago today when the first of a parade of bank CEO’s (Citicorp (C’s) Pandit) noted that he thought the bank would be profitable for the quarter; this was followed by similar comments by J. P. Morgan (JPM) and BankAmerica (BAC) immediately thereafter. Furthermore, there were rumblings from all three stalwarts that they were going to replace the TARP funding sooner than later. Well, in a nutshell, all that change between Thursday and yesterday. JPM’s CEO Dimon noted that March was worse than January and February, the government indicated that the TARP monies would not be returned anytime soon, and then Geithner squelched the hope that things were finally beginning to recover. Thus, it added up to the perfect combination for a nasty day yesterday. For day traders, we simply absolutely must monitor the news of the moment moreso than ever because any headline moves markets. Furthermore, with the incredible percentage moves of late, the breadth of the reaction to every headline is bigger than ever thus once again, we must absolutely understand the macro situation to focus upon our micro timeframe trades.
Markets in Asia were mixed overnight with Tokyo down 1% yet Hong Kong was up 1%. In Europe, prices rebounded a bit from yesterday’s deep sell-off with prices up 1.5% on average. Gold and oil are flat along with bonds while the dollar is stronger against the yen. Futures are stronger today in a bit of a bounceback following the two-day sell-off. With news flow relatively light and today marking the end of a terrible first quarter (yet great march), look for a relatively quiet day. Trading will likely be particularly tricky and quite honestly, I have little confidence in my action plan today, but here it is anyway: it’d seem that there’d be some selling into the bounce, but with selling pressure not overly pervasive yesterday as it was more of a case of a buyer’s strike due to the plethora of bad news, some shorts will likely cover as the day goes on as window dressing takes hold. Thus, look for an extremely choppy relatively low volume day with an upside bias. Financials and big cap tech will be your benchmarks.
Watch list:
033109Eriklist.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 (preferably to the downside in a downside market and the upside in an upside market) 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
IDCC- closed near a high after being upgraded and announcing a solid licensing deal
IBM, AMZN- amidst a lousy tape, closed near a high
MWA- had massive buy order on close despite sell imbalance; upticked about 20% on the close
IBOC- mentioned on “Mad Money” last night
TBSI- great earnings; smashed estimates for the quarter
DDRX- sold its Gloria Jean’ Coffee Int’l division which gave it a much needed capital infusion; stock was up over 200% yesterday and closed near a high
LEN- beat earnings estimates for the quarter
Bad-The following stocks have bad news and/or a weak technical pattern
OXM- beat on earnings, but will not provide guidance
AEP- warned on earnings and announced they will be issuing stock
PFG- closed near a low
LNC- closed near a low after withdrawing its application to the FDIC’s TLGP, but may have to reduce its dividend and/or restructure
COF- closed near a low
JPM, WFC, BAC, PNC, STT – all closed near their lows
PRU, MET, AFL, ALL- among the major insurers closing near their lows
GMXR- broke to near a new trend low yesterday
IR- warned on earnings
BXP- closed near a low in a weak REIT sector
ACOR- received ‘refuse to file’ letter from the FDA
SCS- poor earnings
Earnings:
TUES MAR 31 BEFORE
GIGM HNP LEN
SCS TAM
TUES MAR 31 AFTER
APOL FUL
Good luck today.
Epiphany Trading, LLC
http://www.epiphanytrading.com/
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
No comments:
Post a Comment