I’ve devoted two columns in this space to the ongoing travails in Greece in the last month (Dec. 28, 2009 and Jan. 29, 2010 posts here:
http://epiphanytrading.blogspot.com/search?q=greek
Well, I’m going to do an offshoot of a 3rd. Yesterday, I made passing reference in the blog to problems in Spain and Portugal. Problems there took full effect on Wall Street in trading yesterday. Ironically, all of this started with what seemed like a positive when the European Union pledged on Wednesday to back Greece’s battle plan to cut its budget deficit. But by doing so, it led investors to want to rid themselves of securities of countries with even worse shortfalls than that of Greece- much less express disbelief at the proposal put forth by the Greeks! Attention focused to other European nations- specifically Spain and Portugal after the Greek ASE Index fell over 3% amid worries of a strike by the country’s biggest union which would indicate that Prime Minister Parandreou may not win popular support for his spending reductions. This in term led to the shifting focus with Portugese and Spanish bonds leading decliners. In turn, the biggest Spanish bank- Banco Santander had a 9% plus decline in Spanish trading on Wednesday night/Thursday morning. Nations such as Lithuania and Poland followed suit as well in eastern Europe. While I can (and likely will in coming days go into more extensive detail on the problems in Europe), suffice to say it has led to a continued decline in the euro. And that has been one of the cogs in the recent rally due to the carry trade. As many hedge funds using mathematical algorithms unwind their stuff, it causes stock turmoil. Gold had its worst decline in two years, oil was down almost 6%, and of course equities worldwide sold off from Rio to New York. Be aware ahead of a weekend that ‘big money’ is on edge right now and as day traders, we must keep an eye to the economic turmoil and esoteric instruments such as Greek bonds- because the performance of those instruments is having a near direct correlation on the domestic stock market right now.
Markets in Asia were drubbed overnight with markets down 2.9% in Tokyo and 3.3% in Hong Kong. Prices followed suit in Europe in falling 1% to 2% across the board with relative weakness in Paris and relative strength in Frankfurt. Oil is marginally higher with the dollar flat against the euro but notably stronger against the yen. This is the best sign all morning long, i.e. if the yen is showing relative weakness, it may well indicate that the carry trade weakness of yesterday may be a one day show. Best guess off-hand is that the markets open higher as a relatively weak jobs report is being shaken off. This was discussed in the chatroom earlier this morning, i.e. futures were hanging in OK even with all the world-wide weakness. After that, there will likely be some selling into the early strength. During this time, follow the benchmarks- GS, AAPL, et al. They will likely tell the tale. If the sell-off holds around or just below unchanged, look for some short covering from there. That is a critical juncture though. Focus on the stocks in the news and any and all relative strength plays.
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
OPTR- announced positive results from second Fidaxomicin phase III study
PWER- great earnings
RMD- good earnings
FMC- good earnings
OFI- closed near a high on good earnings
AGN, WM, NVLS- mentioned on “Mad Money” last night
BTIM- positive independent study results regarding Hextend usage
TSN- good earnings
APD/ARG- APD made proposal to acquire ARG for $60/share in cash
AVII- AVI-5038 got European orphan drug designation for Duchenne Muscular Dystrophy
Bad-The following stocks have bad news and/or a weak technical pattern
BMRN- reported lukewarm data on BMN 110 and had somewhat disappointing revenue guidance
TTMI- poor earnings
ILMN- beat on quarter, but earned on year earnings
WFR- closed near a low after issuing terrible earnings
PENN- closed near a low after issuing terrible earnings
AVAV- closed near a low
AMAG- closed near a low amid all sorts of rumors about a negative reaction from hospitalization to death from patients using the company’s Feraheme
LAD- closed near a low after issuing terrible earnings
SPR- closed near a low after issuing terrible earnings
V, MA- closed near a low- MA posted terrible earnings while V’s were good thus the disparity in percentage losses
AAPL, AMZN- closed near lows
GS- closed near a low
X, AKS, NUE- closed near lows
JOYG, BUCY- closed near lows
WYNN- closed near a low
CNX- closed near a low
MOS- closed near a low
CLF- closed near a low
AET- poor earnings
Earnings:
FRI FEB 5 BEFORE
AET AIV AON
AXL AYE BPO
BZH LEA PPL
SPG TE TSN
WY YRCW
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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