The watch list can now be found on the "Trade of the Day" thread at:
http://www.tradeoftheday.org/
The blog will continue to be posted here and can also be found on our forum via the Epiphany Trading Blog thread.
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For those chocoholics out there like myself, you know how that first piece of chocolate you eat out of a bag of Hershey’s Kisses tastes so good after a dinner? And the second tastes just as good? And the 5th is good too? And the 7th is leaving you slightly nauseated, but you still want chocolate? And the 15th is the one where you say “I shouldn’t have eaten that” and you feel sick to your stomach and “off” the rest of the night (and sometimes the next day from chocolate withdrawal)? The point here of course is that a good thing is a good thing until too much is utilized in which case it becomes toxic. So it is in the world of finance and economics. There were two major economic reports out yesterday. First, the New York Empire State Manufacturing Index fell sharply in November. But, on point, the producer price index came in significantly above expectations. The PPI is a measure of the average change over a period of time in selling prices received by domestic entities for their product. For instance, if the only component of the PPI was Hershey’s and it costs HSY 40 cents to make a Hershey bar in year 1, but in year 2, it costs 44 cents, the PPI would be said to rise 10% over the course of a year. When there are fears of deflation, one likes to see a little inflation. I mean, imagine if a teacher or a government employee or any other employee of a salaried job saw their wages decrease on annual basis. Too much inflation of course is bad too as your fiat paper currency is worth increasingly less. So, much like Goldilocks, it needs to be just right. The immediate-term fear for the markets will begin to be addressed today. With yesterday’s worrisome PPI, the trading world will be focused upon inflation and the exit plan from the government stimulus. With the results of a Fed meeting out at 2:15PM ET this afternoon and many players away, there could well be action from the Fed in its statement. If there are any hints of sooner-than-expected interest increase or language aimed at expediting the TARP exit in a way the markets don’t like, watch out. Conversely, if the Feds can phrase it correctly and not throw cold water onto the recovery right now (whether warranted or not), with the markets having failed to fall yesterday, the gains could be sharp equity-wise. Currencies will be well worth watching as well as the dollar’s reaction to whatever occurs today will be quite telling. So, be prepared for a bit of a busier day today, be ready for 2:15PM ET, and be prepared to do some deep thinking tonight about whatever you see today.
Markets were widely mixed in Asia with Tokyo up 1%, but Hong Kong down 1%. Markets moved in a more uniform fashion in Europe with the bourses all up ¾% to 1%. Gold is up 1%, oil ahead ¾%, and the dollar is a tinge weaker. Futures are ahead overall, bur certainly off their highs. Look for a quiet day for most of the day in choppy fashion albeit with an upside bias. As noted above, what happens at 2:15PM ET will set the tone for the rest of the day as the Fed makes it moves. Ahead of the announcement, focus on microcaps, stocks in the news, the relative strength plays…and avoid scalping of any sort. After the announcement, focus on financials and big cap techs in line with whatever the market is doing.
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
ADBE- decent earnings
V- closed near a high
LEAP- closed just off of a high
SAM- boosted earnings guidance
ROP- announced it will be added to S&P 500 on 12/22 post-close
SNS- closed near a high after posting great earnings
XRA- closed near a high
GOOG- featured positively on “Mad Money” last night
JOYG- good earnings
ACHN- announced positive preliminary phase 1b data of its ACH-1625 to treat Hepatitis C
GIGM- selling 60% of its software operations for cash to Mangas Gaming
Bad-The following stocks have bad news and/or a weak technical pattern
GIII- share offering
BRCM- confirmed revenue guidance for next quarter, but did not say anything about earnings guidance
GY- closed near a low after announcing convertible notes offering
FDS- closed near a low after posting terrible earnings
CIT –closed at a post-bankruptcy low after Fitch withdrew its rating
CIE- priced its 63 million share IPO at 13.50, below expected 15-17 range
TMH- priced its 13.3 million share IPO at 12; below expected 20 million share offering
PLA- Iconix broke off talks to acquire all or part of the company
HON- poor earnings outlook
Earnings:
WED DEC 16 BEFORE
JOYG
WED DEC 16 AFTER
APOG HOV
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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