TUES. DEC. 22- Rising Tape

I’m one day late on this piece, but I felt the imbalance post yesterday was more time-relevant. In any case, you know why the market rallied yesterday? Because there was absolutely no reason not to do so. It’s the last two weeks of a year which has seen one of the greatest bull runs of our time. You know how many companies are supposed to report earnings in the next two weeks? Zero. It’s a slow time of the year with many people on vacation so companies make every effort to report by the 3rd week in December or start anew in the next year. You know how many analysts typically issue ‘sell’ recommendations in the last two weeks of the year? Zero. The reason for this is that big money managers tend to defend their positions and randomly bolster winning positions when possible to window dress particularly in strong markets because they want to show that they are keeping up with or beating the market. Six of the seven times that the S&P 500 posted gains of 20% or more for a calendar year, the average gain for the last two weeks of the year has been 4%. So, yesterday was quite typical. I am no prognosticator so I won’t show my bias, but I will say this: as things continue to slow during the year, be prepared on the up days in particular for some random explosive gains in select stocks and focus upon those stocks as your main trading conduits on any given day through New Year’s Eve.

Markets throughout the world rallied overnight with prices up 2% in Tokyo, just shy of 1% in Hong, and 0.5% to 1% across the board in Europe. Gold is up slightly, oil down slightly, and the dollar is little changed with bonds up mildly as well. Futures are slightly positive. Looks like a microcosm of yesterday; prices have a bid with no real news out there. Focus exclusively on the stocks in the news and on the microcaps as well as any strange relative strength divergences. Otherwise, stay quiet.

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

JBL- good earnings

CYN- closed near high of day after announcing acquisition of the assets of a failed bank

CSIQ- closed near a high

TEX- closed near a high after announcing the sale of a division to BUCY

QELP- closed near a high after announcing a major debt reduction program

ADES- closed near a high after updating its joint venture with CyCLean

X- closed near a high

RXII- closed near a high after Rodman & Renshaw set a price target of 8

RRC- featured on “Mad Money” last night

AVII- positive MDA treatment data

LNN- decent earnings

DVN- selling interests in three Gulf of Mexico projects to Maersk Oil for $1.3 billion

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

TTWO- sold a unit to SNX, but also warned on earnings outlook

ATHX- island reversal after announcing collaboration deal with PFE

UUU- maintained its relationship with a ‘large national retailer,’ but will only sell its goods online now

FUQI- broke to an immediate-term low

POT- the Belarusian potash and Chinese buyers reached an agreement on a 2010 Chinese potash contract at pricing less than expected according to several industry trade magazines

CMC- poor earnings





Earnings:

TUES DEC 22 BEFORE

CMC LNN


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