As noted in our chatroom and over our audio feed, for once, despite my status as the Great Pontificator, I was at a loss for words (stop cheering/jeering, please) for quite some time. After thinking about it, I thought about writing a piece about the electronic markets versus the specialist system, just the computers, how things like this can happen, and about 10 other things which I will think about and write about over time once I feel more comfortable doing so with the passage of time and the acquiring of knowledge. Five distinct thoughts do come to mind which are worth discussing for all traders. First, from my vantage point, I was smart enough yesterday to trade when things were a little more settled in getting/out of positions rapidly, but when there was complete chaos, I decided to step away. I had absolutely no clue what was going on. I half-expected to see that a dirty bomb was tossed among the throngs of people in Athens with the image of the riots plastered on our television. I did not know if a terrorist got lucky with a car bomb in New York. I did not know if a nation defaulted on its debt. I did not know. I did not know. But what I did know was that it was better to be a bystander with no positions than to hemorrhage money. The time to try to make money was around 15 minutes after the calamity when things were volatile yet calmer. Second, I don’t want to hear one person yap about they should have been done this or they should have done that. See number one. I certainly did not know what was going on (have I mentioned that yet?) and I’m not taking a stab in the dark when I say that most people didn’t either. Most could not buy PG at 39 or Accenture at 0.01 a share unless they had orders (which are still being investigated). What if I bought a mere 1,000 shares of AAPL at 230 and it fell to 130? I’d be out $100,000 in minutes. Third, let’s go over the concept of the ‘fat finger.’ You know how you along with everyone else has hit a button and realized almost instantaneously that you made a mistake, i.e .you meant to buy instead of sell for instance? That is likely what happened yesterday when all was said and done. Fourth,
This caused real real pain yesterday. Many people and funds were totally ravaged. Numbers and computers can cause real real pain. Realize that. Finally, don’t take away from what actually did occur net-net. The markets finished down about where they were before the mess- over 3%. The euro is crumbling. The oil slick is getting closer. There is real trouble here. I wrote a piece on Monday about how volatility is back…welcome to it, traders.
Markets in Asia predictably fell overnight with Tokyo down 3.3% and Hong Kong down 1.1%. In Europe, markets were down sharply, rallied a bit, and then came in with Germany down 1%, London down 0.5%, and Paris down 2.2% as of this writing. Following British elections and the approval of the German parliament for the Greek aid, the dollar is notably weak with the euro back up over 1.27 and the yen back above 92 yen to the dollar. Futures are slightly over. Overnight, the major exchanges agreed to bust trades up or down at least 60% from where the price was from where the intra-day collapse began. What this means is this: if IBM was at 124, went to 3, and back to 123-
If you bought it at 20 and sold It at 100, you’re short from 100. So, a lot of those shorts are stuck. Combine with a great jobs report and there’s an uptick. Off-hand, the markets are going to track the currencies- no doubt about it. But if there is stabilization, look to play this as an A-B-A2 to the upside with the oversold conditions and decent news flow. Trade ostensibly only relative strength/weakness and only big caps.
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
ROVI- decent earnings
STEC- decent earnings
CROX- decent earnings
MED- closed near a high after posting good earnings
AIG- decent earnings
LVS- decent earnings; MGM and WYNN may trade with it
Bad-The following stocks have bad news and/or a weak technical pattern
HANS- terrible earnings
GXDX- terrible earnings
RST- poor earnings
CLNE- poor earnings
CNQ- poor earnings
SQNM- poor earnings
SGMS- poor earnings
HIL- closed near a low after posting poor earnings
SMP- closed near a low after posting poor earnings
PPC- closed near a low after posting poor earnings
Earnings:
FRI MAY 7 BEFORE
CF EIX HUN
MIR PCG XEC
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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