Once a upon a time, in a time not so long ago, everybody waited with baited breath on the moves of the Federal Reserve on days in which interest policy was to be set. Prognosticators would guess what the markets would do if rates went up (or down) because sometimes, the market wouldn't do what obvious logic would dictate. Things are quite a bit different these days. The Fed has left interest rates alone for quite some time and policy usage of actual interest rate movement does not seem likely to occur today or anytime in the immediate future. However, the focus today is on the language of the Fed statement. In recent years, the policy statement has been accompanied by some more color along with gentle hints for the future. The language of that statement has largely remained static for some time as well now, but the eyes today will be on the possibility of any change in the statement after recent postive economic activity. The ultimate hope is that the economy becomes strong enough that interest rates can be raised because it'd show the need to slow things down. Thus, today, it is time to speculate as to what will happen based on verbage. If the Fed leaves the language alone, one school of thought has a line of thinking that this is good because it allows rates to remain low ergo it can keep a number of prospective borrowers in the pool. The other school thinks that this is bad because growth is still forecast to be stagnant. If the Fed changes the language, one school of thought says this is good because it implies things are getting better while the other school is afraid of interest rate hikes and inflation. In the market we're in, the typical day trader should focus on the micro in all likelihood, i.e. a slight change in language is not good because many people heavily short are waiting for the Fed to indicate there may be inflation thus by leaving the statement alone, it shows that the Fed will keep pumping liquidity into the economy. Regardless of whether I am right (and I have about a 50% chance of being right!), definitely keep your eyes on the markets post- 2:15PM ET today when the statement is issued as the direction for the next day at least if not longer even with the unemployment report due out Friday may well be established just after the statement is issued.
Markets in Asia overnight were strong with Tokyo up about 1/2% and Hong Kong up 1 1/2%. Bourses were similarly nicely higher across Europe with gains ranging from 3/4% in London to 1 1/2% in Germany. Oil is up over 1% with gold approaching $1,100/oz in rallying another 1% as well. The dollar is weakening against the Euro. All of this leads to a positive picture for futures with the markets up modestly; look for the gains to hold at least through the itnerest rate report in quiet trading. Focus once again on the earnings flow and be a bit more careful today as the opportunities will not be quite as prevalent.
Watch list:
11042009Eriklist.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
AIG- closed near a high amid massive short covering
HGSI- closed near a high on continued momentum from its positive product news Monday morning
OSK- closed near a high after issuing strong earnings
USEG- closed near a high after positive oil well news
UNP, CSX- among the railroads closing near a high yesterday after the BNI takeover
HIG- great earnings
DLB- good earnings
INT- good earnings
SGY- decent earnings
DVA- decent earnings
NETL- good earnings guidance
PACR- announced better than expected earnings and resolved a dispute with UNP
AIN- closed near a high after posting great earnings
AEM, AU, MFN- among the host of gold entities- big and small- closing near their highs
GRMN- good earnings
TEL- decent earnings
TRW- good earnings
TWX- decent earnings
FWLT- decent earnings
CMCSA- decent earnings
WCG- good earnings
MMC- good earnings
TNDM- good earnings
DVN- good earnings
Bad-The following stocks have bad news and/or a weak technical pattern
FUN- closed near a low after releasing poor earnings
CRL- poor earnings
KFT- decent earnings, but missed revenue guidance
STEC- warned on next quarter's revenues
DRIV- poor earnings
TRLG- terrible revenue guidance
MYGN- poor earnings
CNW- poor earnings
CCI- poor earnings
BHI- poor earnings
Earnings:
WED NOV 4 BEFORE
ADP AGU ASCA
BDX BHI CMCSA
DVN EP FWLT
GRMN HW LINE
MMC OSIR PHM
RIG RRD TAP
TEL TKLC TNDM
TRW TWX WCG
WPI XTO
WED NOV 4 AFTER
ALL CECO CELL
CNO CSCO CXW
DOX EDMC EGLE
FCN FRT GDP
GG GGC HCN
HLS HUN IO
IOC MCHP MELI
MUR NKTR NWS
PL PRU PVA
QCOM SHO THOR
THQI WFMI
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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