THURS. DEC. 10- Wild Currencies

Many people recently have asked about a gold standard. Now, let me emphasize this is as close to an opinion piece as I’ll ever post it here so I don’t necessarily speak for others. This said, to me, this is actually a serious question. First, let’s discuss it and then I’ll relate it to day trading in the end. Throughout history, the gold standard has totally utterly broken down. Repeatedly. Most recently, the U.S. promised to fix gold at $35 an ounce post World War II. So, what happened was that France reduced its dollar reserves, trading them for gold from the U.S. government which destroyed U.S. economic influence throughout the world. The massive expense of the Vietnam War caused Nixon to kill off the gold standard in 1971. Furthermore, in the 1920's/early 1930's, the British-US dichotomy caused a stronger demand for gold compared to goods which helped spur deflation which helped spark the deflationary spiral of the early part of the Great Depression. So, is the solution to not increase funding for things like wars (to keep budget deficits from occurring) or hope history won't repeat re the deflation of the 1930's? My solution: keep deficits in check by not overspending. If we want to fund Vietnam or whatever and don't have the money, cut it elsewhere to keep budgets in-line. But gold standards won't help as it historically causes other problems (we can go back to the Napoleonic wars and US Civil War too). So, since my solution isn't a real solution as governments will spend whatever they want, nothing can be done nor will it ever. It is a sad truth. Governments inherently spend too much and will always do so. Inevitably, they will print in a fiat system and fight to get off the gold standard under that gold system because, hey, if they “need” the money, they need the money. Now, for day traders, the side note is this- 98% of people are bearish the dollar right now according to various sentiment polls. As of two weeks ago, the Tokyo stock market was at its lowest point in almost five months because the yen is so strong. Realize that since nations like Japan, Greece, and Spain are actually in worse shape than the U.S., the dollar is actually going to strengthen relative to other currencies in time likely quite soon if for no other reason than sentiment is so bad so with so many shorts, it can have a sharp countertrend move (indeed, the move may have already started). So, at a minimum, definitely keep your eyes on currencies full throttle as any exaggerated movement can cause an exaggerated stock market movement as well.

Markets in Asia were generally lower overnight with Tokyo down about 1.5%, but Hong Kong only down 0.2%. The bourses in Europe, however, have turned nicely higher- up about 1% on average. Commodities are rebounding a bit with gold and oil both ahead just under 1%. The dollar is mixed with tiny moves across the board. Futures are nicely higher. Look for a relatively slow day, but there is definitely a bid there with techs and financials higher. The strength likely holds in light trading. Focus on the limited newsflow and relative strength plays.

Watch list:
12102009Eriklist.zip

Reiterating-
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

LULU- good earnings

OXM- good earnings

CMTL- closed near a high after posting good earnings

WU- announced $1 billion stock buyback

GS- among big cap stocks closing near their highs

NLST- closed near a high

PLL- good earnings; boosted outlook

DVAX- closed near a high after a European manufacturing facility was approved for commercial production of Heplisav

VCI- closed near a high after pre-announcing earnings guidance

X- closed near a high

AAPL, AMZN, HON, NRGY- mentioned positively on “Mad Money” last night

GIL- decent earnings

UPI- study of its OrBIT shows sustained positive therapeutic effects

IOC- government of Papua New Guinea approved IOC’s LNG project agreement

AKNS- company’s solar panels now available at Lowe’s

COST- decent earnings

CMED –recommended in an investment newsletter

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

CYTK- ended collaboration with GSK

COO- island reversal in closing near a low after posting great earnings

CIEN- poor earnings

DG- beat revenue guidance, but missed earnings estimates






Earnings:

THURS DEC 10 BEFORE

CIEN COST DG

GIL SFD

THURS DEC 10 AFTER

none


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