Every day, I give a cursory glance to the overseas markets, the commodities markets, and the myriad of other markets such as bonds and oil. I post the overnight performance in this space every morning. Every so often, particularly when some divergences begin to occur notably in the markets, I study things a little more in detail and pass along some things that I find particularly interesting here. Well, yesterday morning when I awoke from my slumber around 4:30AM, I noted that the equity futures had weakened notably and the dollar was strong…made sense. Except that two numbers caught my eye. First, the 9500 handle on the Nikkei occurred yesterday (try 9400 handle today) and second, the yen continued to rally against the dollar. As it turned out, despite the global rally in equities, the Nikkei closed at a four-month low yesterday on volume averaging 50% above last week’s average volume. The nation’s biggest bank (Mitsubishi UFJ Financial) was forced to do a massive fundraising. Ostensibly, concerns about the fiscal and economic policies of the newly-elected Democratic Party despite initial optimism have weighed upon shares of Japanese stocks. As it turns out, what is good for U.S. exports in the weaker dollar is negative for major Japanese exporters such as Toyota, Canon, and Sony. However, the Japanese bank morass which has been in place for about 20 years now is particularly bad in Japan far and above most other Asian nations. Thus, the triple whammy of capital raisings by the banks, the strength of the yen, and politics are all playing a part in the decline of the Nikkei. For day traders, it certainly makes for a notable sideshow. See, the correlation has loosened ever so slightly between the dollar and other commodity markets (i.e. witness gold up yesterday despite oil being negative with the euro weak). So if things don’t turn around in Tokyo, their performance could begin weighing upon the rest of Asia (as certainly happened Thursday morning in Hong Kong and Sydney) which set the sage for declines state-side. The global markets continue to be interlocked with the occasional straggler (in this case, Japan); but that straggler could upset the apple cart quite easily particularly as we approach year-end.
Markets overnight were weak overnight with Tokyo down another 0.5% and Hong Kong down a bit more. Prices in Europe fell about 2/3% on average. Oil is down 1%, gold 0.5%, and the dollar is up another euro. Not a great picture. There are all sorts of rumors out there on this options expiration Friday from a default of the Ukraine government to a ‘fat finger’ error trade in the dollar-euro in which someone accidentally bought too many dollar contracts against the euro. This is leading to a mild negative for the futures state-side. Yesterday was a weaker day than the averages would show; volume picked up, with the S&P 500 and NASDAQ both down 1.5% against the Dow’s 0.9%. Today will be wildly choppy and illiquid in the first hour of trading in particular with all the rumor mongering and the options expiry. It should calm down thereafter pending the dollar movement against the euro and then get choppy and illiquid again in the last hour. One must pick spots and overtrading today is going to be particularly fatal so cut down on size and increase selectivity. Focus upon the stocks in the news specifically.
Watch list:
11202009Eriklist.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
BONT- closed near a high after posting great earnings
FTNT- closed near a high on its 2nd day of trading
TTIL- closed near a high after posting great earnings
TSL, STP- closed in the top band of their range after posting good earnings
NLST- snapped back in finishing near day’s high and week’s closing high
VRGY- decent earnings
RHB- featured positively on “Mad Money” last night
HIBB- decent earnings
DBRN- decent earnings
ARCL- priced 6.25 million share IPO at 16.50 within 15-17 range
SVN- priced 10.1 million share IPO at 11 at high end of 9-11 range
SJM- decent earnings
DNDN- received complete response letter from FDA with decision on Provenge expected in May 2010
Bad-The following stocks have bad news and/or a weak technical patter
GNK- among the weakest of the dry bulk shippers in closing near a low
PPD- closed slightly off of a low after receiving a complaint from the Federal Trade Commission against the company’s CEO and Chief Marketing Officer
DELL- poor earnings
GPS- poor earnings
INTU- poor earnings
ADCT- terrible earnings
FL- poor earnings
TIXC- stock closed near a low; company addressed the issue before the close yesterday in saying there was no news accounting for the stock drop
TLB- closed near a low
PALM- dropped the iPhone workaround (for now anyway)
PHM- in Sell Block on “Mad Money” last night
CLD- priced 30.6 million share IPO at 15, below 16-18 range
GTEC- priced 4.6 million share IPO at 13, below 14-16 range
ANN- beat earnings estimate, but missed revenues estimate
EMS- pricing 8 million secondary at 48.31
DHI- poor earnings
DRYS- priced secondary offering at 5.75
Earnings:
FRI NOV 20 BEFORE
ANN DHI SJM
Good luck today.
Epiphany Trading, LLC
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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