THURS. JUN. 3- Rally Day

In this manic market, the last two days have been particularly manic with the shorts having a party on Tuesday afternoon followed by a weak overnight in foreign markets and then…and then…a 2.6% pop in the S&P 500 in going off at the day’s highs. There were two main factors which accounted for the run-up…both beginning with speculation and then getting cemented from DC. First, there was hope- however vain (although hopefully it becomes realized) that British Petroleum’s (BP) latest attempt to plug the massive well spewing oil into the Gulf of Mexico will succeed. I won’t go into extreme detail as you can look up the procedure on any website or in nay newspaper, but suffice to say investors were betting that the splitting of the spill into pieces may help ease the flow’s pressure and thus allow for the plugging of the pipe. This was not discussed in detail by President Obama yesterday, but he did mention the magic words “natural gas” in definitive terms with the thinking that natural gas as a viable alternative to oil may come into vogue. Thus, not only did oil stocks rise, but natural gas plays did as well as the energy sector led the rally. The second factor was jobs. No matter that the job gains may be ephemeral because of the census worker tally or that all anecdotal evidence indicates that the unemployment picture does not remain all that happy. But yesterday was the first time in my career (almost 15 years) of plugging away at a trading desk that I remember a president and a vice-president in the same day indicate that a job report due out imminently was strong. They have no incentive to talk about it otherwise so why do it unless…the number may well be strong. It may be just a coincidence, but that chatter scared a few shorts as well. Thus, as markets try to anticipate what will happen rather than react to events, the stage was set for a nice all-day rally…which is exactly what we got.

Markets overnight were strong throughout the world. In Asia, Hong Kong rallied 1.6% with the Nikkei surging 3.2%. The gains are sharp in Europe as well with London up 1.7%, Germany 1.8%, and Paris 2.2%. Oil is up about 1%, gold is down 0.5%, and the euro is slightly stronger against the dollar. Futures are modestly higher in lockstep as drillers are once again higher. The ADP report came in a tinge weaker than expected though so some of the gains are mitigated as of this writing. Look for a continued attempt to build on yesterday’s rally in the early part of the session. Everyone will be looking to short because that is what has worked…thus, it probably won’t work this time simply because a lot of people are caught short and the short covering has a way of feeding on itself with the backdrop of positive psychology. As the morning turns into afternoon, keep your eye on the major financials and techs but especially the energies to see if they can build on their gains. Look to short relative weakness after about 12PM in particular whereas the morning should be spent buying A-B-A2’s as long as the market does indeed hold.

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

APSG- good earnings

XIDE- great earnings

CYBX- decent earnings

CWTR- decent earnings

HOV- decent earnings

JEC- rallied on rumors of an LBO

BIDU- closed near a high

HAL, SII, SLB, OII, NBL, CAM, BHI, UPL, APC, NOV, ANR, BP, ATPG, PXP- closed near their highs

TSRA- closed near a high after posting good earnings

AMGN- closed near a high after getting Prolia FDA approval

POT- closed near a high

FCX- closed near a high

CLF- closed near a high

MEE- closed near a high

X- closed near a high

GS- closed near a high

FSLR- closed near a high

AMZN- closed near a high

IBM- closed near a high

LVS- closed near a high

PNC- closed near a high

EGP, CMI, PCAR, NAV- featured on “Mad Money” last night

REGN- closed near a high

WPRT- closed near a high in a major reversal after posting earnings

DE- closed near a high

DVN, RRC, SWN- closed near their highs

JOYG- blowout earnings

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

CEPH- phase II trial of schizophrenia treatment did not meet primary endpoint

UVV- continued weak in closing near a low

IFLG- continues a very negative downtrend after exploding earlier this year; closed near a low

CPC- closed near a low



Earnings:

THURS JUN 3 BEFORE

CHRS JOYG STP

UTIW

THURS JUN 3 AFTER

COO SAI

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