There was a very important article in The Independent out of London last Tuesday morning. The title of the article was “The Demise Of The Dollar.” According to the reporter who penned the piece, “in a graphic illustration of the new world order, Arab states have launched secret moves with China, Russia, and France to stop using the US currency for oil trading.” Since this article came out, the Saudi Arabians among others issued denials when quizzed about it, but what are they supposed to say? If they confirm the plan (if it is true), the dollar goes into freefall. Very notably on Tuesday, the dollar still declined rather dramatically with gold breaking out to a new all-time nominal high and oil moving ahead as well. Oil rallied because it is priced in dollars and as the dollar becomes cheaper relative to other currencies, so does oil as it is priced in dollars. Gold moved because of a continued flock to safety plus the conspiracy theorists would have one believe that this is the beginning of the transition, i.e. exiting dollars from oil into gold. In the long run, this does not bode well because it signals a potential economic war between the US and China over oil from the Middle East. Indeed, last week, World Bank president Robert Zoellick noted a potential hegemony change as China’s economic power is definitely ascending at the moment in the face of domestic economic problems in the U.S. But that’s for later. In the immediate-term, however, this is bullish for the stock market. As noted above in relation to oil specifically, it makes equities cheap to foreigners- be they Middle Eastern, European, Asia, or to any other place where the dollar is weakening in relation to other currencies. This story heldped to fuel the rally last Tuesday (and much of the week for that matter) along with the Australian interest rate hike. So, as already discussed here, the currency market is orderly right now, but one must keep one’s eyes on the direction of the dollar and its velocity as it is definitely impacting equity movements.
Markets in Asia were generally lower overnight with Hong Kong down about 1% with the bourses, however, up 1 ¼% on average in Europe. Oil is sharply higher near the top of its recent range with gold and the dollar higher as well. Friday was the first day in quite some time that the markets and the direction of the dollar went in a direct correlation. There are all sorts of rumors of market intervention and it’s a semi-holiday atmosphere. So, look for light trading today with the direction to the upside once again. Highly illiquid conditions will prevail so trade particularly carefully and only in the big movers at that. Use mid-day today assuming it is slow to do things like earnings research so you will be ready for the onslaught of data coming in the next three weeks.
Watch list:
10122009Eriklist.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 specified.If 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
CAGC- closed near a high after pre-announcing great earnings
CHNG- closed near a high
SRZ- closed near a high after announcing sale of a unit
IBM- closed near a high
BCRX, NVAX, SVA- closed near highs amid reports that the FDA designated H1N1 as an epidemic in several states
UCTT- closed near a high after boosting guidance
HPJ- closed on a high
CAAS- closed near a high
WCRX, NVLS- on “Mad Money” on Friday night
BDK- pre-announced earnings to the upside
OSK- received $410 million contract
DNDN- CEO of Genentech joined DNDN’s board
Bad-The following stocks have bad news and/or a weak technical pattern
AONE- closed near a low as it continues to come in from its massive run-up
YONG- announced Friday afternoon it is restating its 2008 and 2009 financials
POT- closed near a low
SCIL- island reversal after posting great earnings
KBH- announced SEC launched an investigation into its accounting practices
LEAP- closed near a new trend low on a new prepaid plan by T
DEPO- poor phase III results
LAZ- CEO Wasserstein in hospital
DRIV- lost SYMC contract; SYMC was biggest customer
FAST- poor earnings
Earnings:
MON OCT 12 BEFORE
FAST SCHW
MON OCT 12 AFTER
none
Good luck today.
Epiphany Trading, LLC
http://www.epiphanytrading.com/
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
Joseph R. McCandless- Managing Partner
D. Timothy Seaquist- Managing Partner
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