Even to the casual trader, it is readily apparent that liquidity has dried up substantially in the last few weeks. Why exactly is this? Simple answer: There are less participants out there than there were before.” Next blog post, please. But as always, there is a bit of a more detailed if not complex answer. In no particular order, there are several reasons for liquidity to shrink. First, as noted here in two different blog posts a few weeks ago, the typical mutual fund concludes its fiscal year on October 31. With the upheaval and the subsequent comeback of equities in 2009, many mutual funds (right or wrong) are willing to just let the clock run out this year after booking performance. Second, people are just flat-out tired. Speaking for me, after all the volatility of the last 12-18 months and not knowing what to expect combined with all of the busy work and preparation I employ to trade for a living, it has been a grueling stretch. Third, sadly, many people aren’t in the game anymore- the highest attrition typically occurs in November and December as traders who blew out their accounts simply try to salvage what they have and go home. Finally, it is the holiday season. During this time of the year, newsflow dramatically declines and with it the triggers for trading. People obviously tend to take vacations as well as the kiddies get off of school as the month progresses. So, realize that liquidity regardless of what happens will not be particularly high for the duration of the year and trade accordingly by focusing on the opportunities available and shrinking your share size accordingly in line with the widening bid-ask spreads.
Markets in Asia were down about 1.3% on average overnight. Markets in Europe were stronger as Wall Street’s losses were already factored in with most bourses hovering just above the unchanged demarcation line right now. Oil is bouncing back about 1%, gold is flat, and the dollar is slightly weaker across the board. All of this adds up to small gains for equity futures. With paltry newsflow and a disgusting day outside, look for relatively slow trade. Big cap tech and financials are notably strong this morning so look for a slight bid to remain under the surface most of the day, but it will be a ploddy difficult day to trade barring an unforeseen event.
Watch list:
12092009Eriklist.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
RUE- decent earnings
DPS- signed major licensing agreement with PEP
CMTL- good earnings
EFJI- will receive some money from the IRS as part of a multi-firm agreement by the government agency in buying products
UPS- featured on “Mad Money” last night
PEB- priced 17.5 million share IPO at 20
ECA- announced up to 35 million share buyback and upgraded at TD
HITK- great earnings
COO- earnings came in-line with estimates
RMBS- reached deal with EU over memory chip royalty rates
AVNR- positive phase III data
Bad-The following stocks have bad news and/or a weak technical pattern
TXN- lukewarm earnings guidance
NCS- poor earnings
SAI- poor earnings
MW- terrible earnings
RWC- island reversal in closing near a low
CKR- poor earnings
IPSU- closed near a low on poor earnings
SVU- closed near a low in a sympathy move with KR
CYD- reversed from yearly high in closing near day’s low
DDE- closed near a low
Earnings:
WED DEC 9 BEFORE
JTX
WED DEC 9 AFTER
PLL
Good luck today.
Epiphany Trading, LLC
http://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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