There are two ways that the rest of the year could play out for day traders. I am not good at prognosticating such things so I cannot begin to hazard a guess as to which way this will play, but I am very certain it could only go in one of the two conduits that I will describe. Both are dependent upon the Abu Dhabi contagion and whether the damage is contained. The first way is where my bet was definitively going to lie before the events of last week. In what has been an incredible year of action, the stock market has had one of its most dramatic falls followed by one of its most dramatic rallies literally in the history of trading. People are tired and so is the market. Before last Friday, the VIX was around 20. Mutual funds have booked profits for the year in many cases. There is also a lot of indecision as to what to do next along with what 2010 holds. Thus, there is at least a 70% shot still that the market settles into a range and does absolutely nothing. We end up having days like yesterday where there is spotty action and then a long period of placidity. Last Wednesday, just before Thanksgiving, the NASDAQ traded in its narrowest full-day range in almost three years. Should that pattern hold, there will be limited action in the morning and then a 'waiting for Godot' period all day for...nothing. It'd actually get more acute the later in the month as people give up. The action would be centered upon the microcaps only and trading would be as illiquid as it was on Friday. The other way it can play out is in a frenzy, but on low volume. The dollar and gold are perilous levels with markets in Asia performing very badly (the Nikkei has now lost more than half of the rebound from its 2009 low, i.e. it's trading at the equivalent of Dow 8300 or so based on the domestic market run-up). Nobody knows exactly how bad the Dubai crisis is. Finally, all we hear is how typically December is a quiet month in terms of overall performance. Again, I am not going to predict how this will play out. But I don't think it'll be halfway; it's either going to be very busy or very slow with no in between. Have the mindset to be ready for anything on any given day; it's important not to be disappointed or frustrated by slow action...nor shocked by rapid action.
Markets overnight continued to recover throughout the world with Asia up 2% across the board and the European bourses up over 1%. Oil is up over 1% as well, gold is making a push towards $1,200, and the dollar has broken back below the critical 1.50 euro level. This cocktail combined with money flowing into mutual funds at the start of the month and a bit of a decline of the worry over the Abu Dhabi situation is leading to a nice rally in the futures. Off-hand, there is no real reason to think the markets will give back any of the ground. Look for a relatively strong session to persist barring an exaggerated move in the dollar. Focus only on stocks in the news if the markets remain as quiet and illiquid as they have been as momentum trading will get you in trouble.
Watch list:
12012009Eriklist.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
GES- good earnings and positive guidance as well
ALTR- positive earnings guidance
GS - closed near a high in a strong financials group
AMZN- closed at an all-time high
TRIT- closed at a high
REV- closed at a high; near a breakout on a longer-term chart
ISPH- closed near a high after Leerink Swann identified the stock as one to watch for an unexpected positive surprise in 2010
CSGS- closed near a high after inking a pact with DISH
CYD- closed near a high
WSM, ETN, JAH, WHR, NWL- featured on “Mad Money” last night
MITI- Bayer exercised option to develop antibody with MITI
SPLS- good earnings
AIG- cut debt to government by $25 billion
Bad-The following stocks have bad news and/or a weak technical pattern
HGSI- 12 million share offering
CUTR- postponed release of its Trusculpt indefinitely
SD- acquiring oil and gas properties from FTO; issuing 22 million shares as well
AIG- closed near a low after Bernstein cut its price target to 12
OVTI- poor earnings
NLST- Inphi filed patent lawsuit
AGO- share offering
PLX- signed deal with PFE, but there is disappointment that the company was not bought out
Earnings:
TUES DEC 1 BEFORE
BECN NPD SPLS
TUES DEC 1 AFTER
SNDA
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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