As announced yesterday, new U.S. housing starts surprisingly surged just over 22%. According to the Commerce Department, the jump in housing starts (to a seasonally adjusted rate just shy of 600,000 units) was the biggest percentage gain since January 1990. More importantly, it was the first advance in the number since April of last year. And, oh by the way, the January housing start number was revised higher as well. Now, one month does not a trend make, but it is important to note that the fate of the housing market is at the core of the financial crisis so any uptick in house values could help to spur consumer spending once again. The glaring negative, however, was that building permits (a sign of future construction) rose much less than starts which indicates that the pace of construction may once again slow because obviously if a declining amount of permits are applied for, building of houses/condos cannot keep up a good (sustained) pace. There are several points here. First, the sale of foreclosed homes will continue to compete with new construction of homes until the supply of existing foreclosed homes is whittled away. To date, this has not happened. Second, it is extremely notable that there has been a string of decent economic and corporate news recently; the news in turn has coincided with the market rally. PPI data came in OK yesterday and CEOs at banks such as Bank of America, Citicorp, and Barclay’s have indicated that current quarterly performance is relatively solid. Finally, the decline caught a lot of people off-guard. It is unusual for a number to be that good or that bad so if this is indeed the ‘bottom’ of the economic/market cycle, it is an event such as this housing starts number which would indicate as such. For the day trading world, it is a reiteration of two things. Trade what you see and not what you think/feel and keep your eyes out for every piece of major economic and corporate news because in this hypersensitive world we now live, anything can move the markets- but you have to know what is going on in order to have any chance to succeed.
Markets in Asia were lightly mixed overnight with prices in Europe generally higher ranging from barely in Britain to about 1% in Germany. Everything else from commodities to currencies are quiet. State-side, futures are down slightly with most financials a little lower. That will likely be the theme of the day- consolidation. I am looking for trading on both sides of unchanged for the bulk of the day until the Fed results. At that point, particularly if the markets are up a bit, I think there will be some light profit-taking after this huge run-up ala there is not much else the Fed can do at this point so that may be as good a reason as any to take a little money off the table.
Watch list:
03182009Eriklist.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
ADBE- decent earnings; CFO sees signs of ‘stabilization’
FEED- run-up after great number continues
SINA- major reversal on bad earnings and closed near high of day; ASIA, SOHU, BIDU among stocks to watch with this one for the day
JPM, WFC, PNC, USB, STI, STT, NTRS, MS, GS- among the major financials closing at or near their day highs
CEPH- closed near a high after positive drug news
AFL, PRU, MET, ALL- all major insurers closed near their highs of the day
DRI- great earnings
AAPL, AMZN, IBM, RIMM- among big cap tech stocks closing near their highs
STEC- continues a stunning ramp higher after posting great earnings last week
HEV- closed at high of day
SKIL- closed near high of day
HES- among big oils closing near high of day
BBY- among retailers closing at/near high of day
FFG- closed near high of day
GGC- ramped higher after obtaining waiver help; closed near a high
RIG, XLNX- mentioned positively on “Mad Money”
AIR- good earnings
HUN- responded to S&P action by stating that wins in pending legal cases will provide it with substantial liquidity
BAC- CEO Lewis indicated that BAC may give back the TARP money by the end of next year
GIS- boosted outlook slightly
MET- during presentation, the company indicated their capital is adequate with liquidity not a concern
JAVA- rumored to be bought out by IBM
Bad-The following stocks have bad news and/or a weak technical pattern
GES- warned on next quarter’s earnings
SHS- closed near a trend low after posting bad earnings
MGM- in dangers of imminent default; also had bad earnings
MRX- its lead drug not only may be delayed, but its biggest competitor may get its drug approved thus beating MRX to market
SII- mentioned negative on “Mad Money”
ATU- poor earnings
IBM- rumored to be buying out JAVA
Earnings:
WED MAR 18 BEFORE
ATU DRI GIS
WED MAR 18 AFTER
CLC CTAS I.HS
NKE ORCL
Good luck today.
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
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