MON. APR. 13- All's Seemingly Well At Wells

This is another “wha’ happened” piece. Most people who weren’t around on Thursday don’t have any idea why the markets continued to rally whereas most people who were around to trade on Thursday, well, they don’t understand either. It comes down to one company :Wells Fargo. A seemingly innocuous headlines crossed the newswires at 8AM Thursday morning: “Wells Fargo Sees 55 Cents Per Share For First Quarter.” Except that the estimate was 31 cents. They went on to say that their Wachovia acquisition is going even better than anticipated. What jumped out at me was that they reported another quarter of 10% plus revenue growth and stunningly, they expect to have net income of $3 billion for the quarter! The company reiterated that they should save about $5 billion a year by combining Wells and Wachovia operations and had a 41% increased in unclosed mortgage applications. Now, let’s take all of this at face value (it is still up for debate of course because of the history of accounting shenanigans in the industry, but let’s say everything is pure because, well, I’m an optimistic if idealistic guy). What this news indicates is the first absolute concrete evidence that the end of the world just might not be near. If in this environment WFC can earn $3 billion, it implies that things like nationalization, government interference, and unfettered regulation just might not be the way to go. More to the point, it automatically gave instant credibility anew to the idea of a sound banking system much less capitalism. It shows that things, as bad as they have been, have a shot to get better. For day traders, we’ve witnessed things like the FAZ falling from 115.50 to 10.50 in days. Maybe there is a reason for this. Even if there is not and this particular WFC story is smoke and mirrors, it is worth noting that both good news as well as the stream of bad news we’ve been used to for the past couple of years can move markets extraordinarily wildly these days.


Watch list:

04132009Eriklist.zip

With the exception of the Nikkei which was mildly weaker overnight, every major world market was closed for Easter Monday. Oil is lower, gold is up, and the dollar and bonds are quiet. In the early going, rumors of a pressuring of GM to go Chapter 11, a GS share offering, and riots in Thailand are pressuring the futures. With many people away on vacation and a relative dearth of news, look for a fairly uneventful day today following a weaker open. The middle of the day will likely be extraordinarily placid. There should be a little short covering early in the morning after the run-up of recent weeks, but a ploddy slow downside day is the most likely scenario to occur today with banks in particular as today’s benchmark.

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

TTWO- recommended as takeover play on “Fast Money” on Thursday night

SIVB- closed near a high

MS- closed near a high

GYMB- closed near a high after posting great earnings

USB, NTRS, ZION- strongest closes of the banks in the banking sector

NFLX- broke to new all-time high today and closed near intra-day high

TROW- closed near intra-day high

FMBI, STSA- among smaller banks closing near their highs

SKT- closed near high of day

LUK- continued huge rally in closing near intra-day high

AVB – among the strong REIT’s closing near its high

HIW- closed near high of day

FNF- broke out towards high of year near end of day Thursday

YHOO- rumored to be in talks with MSFT again

WLP/ESRX- ESRX buying division of WLP

Bad-The following stocks have bad news and/or a weak technical pattern

BA- warned on earnings estimates after-hours Thursday

WFR- warned on earnings outlook

CVX- sees its 1st quarter earnings sharply below that of the 4th quarter; XOM may follow

GNW- will not participate in the U.S. Capital Purchase Program

PDCO/HSIC- mentioned in “Sell Block” segment of “Mad Money” Thursday night

GS- looking to do share offering to raise money to repay TARP

WFC- downgraded at Keefe with price target of 12

TRE- negative “Barron’s” article

SPW- warned badly on earnings

Earnings:

None today

Good luck today.

Epiphany Trading, LLC

www.epiphanytrading.com

Erik R. Kolodny- Chief Markets Strategist

Brendan P. Byrne- President