Very quietly lost in the news flow on Thursday (five weeks after the ‘flash crash’), federal regulators put new rules into place at an attempt to eliminate another ‘flash crash.’ On Friday, the major exchanges put the new rules into place with five different stocks- EOG, GPC, HDI, R, and ZMH. More stocks will be added this week by the NYSE with the NASDAQ planning on having a full program in place today. It is very important to note that the new rules will only apply initially to the S&P 500 members. The way it works will be like this: trading of any S&P 500 stock that rises or falls 10% or more in a five minute period will be halted for five minutes. Notably, this so-called circuit breaker would not be applicable between 9:30AM and 9:45AM and not after 3:35PM ET. Thus, exaggerated moves can take place unencumbered in the first 15 minutes and last 25 minutes of the NYSE trading session- times that are known for big moves at times. Also, there is no immediate-term plan to change SEC rules about market-wide halts if the Dow fell 10%, 20%, or 30% over and above the existing schematic. There will be isolated stocks which could be affected like this to be sure; for instance, THO (which is in the S&P 400) dove from just above 28 to just below 21 when it was came out with earnings intra-day on Thursday. It will also be quite interesting to see what happens if there is one errant 100 share trade somewhere (I am assuming the stock would be halted) with ensuing reaction thereafter. Obviously, if there is an extraordinary day, these changes could come into pay with many stocks getting halted. However, for day traders, don’t expect much to change overall on a day-to-day basis as none of these circumstances are likely to be any more prevalent than the present. While almost no trader likes regulation, the changes could have been much more dramatic than were implemented thus the whole situation makes for good D.C. politics, but not much more than that overall on the vast majority of trading days.
Markets were little changed in Asia overnight with Tokyo and Hong Kong both up 0.1%. In Europe, markets are shaking off a BP debt downgrade by Fitch as well as a Greek debt downgrade to junk (which occurred yesterday while U.S. markets were open but Europe closed) with most bourses up about 0.5%. Oil is up another 1% with gold up slightly. The euro is stronger again too. All of this is leading to a respectable uptick in futures. Very impressive microcosm. With CBOE expected to be a strong IPO today, don’t underestimate the impact this could have in bringing some confidence back to the markets as well. Barring a meltdown by GS or the drillers, look for the gains to hold today. Focus on the exchanges on the heels of CBOE, the big cap techs and financials, the retailers after BBY’s number, and some of the smaller cap biotechs listed below.
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
ATRC- received FDA 510k clearance for AtriClip
IFLG- closed near a high on takeover rumors
CBOE- pricing 11.7 million shares at 29 at the high of the expected 27-29 range
ZANE- signed several new contracts
Bad-The following stocks have bad news and/or a weak technical pattern
LZB- poor earnings
TRBN- discontinuing development of TRU-015 with PFE
FCH- 25 million share offering
AAPL- reversed in closing near a low
BIDU- reversed in closing near a low
BP- closed near a low
RIG- closed near a low
DO- closed near a low
GS- closed near a low
V- closed near a low
GOOG- closed on a low
POT- closed near a low
PNC- closed near a low
ELY- terrible earnings warning
GMR- share offering
APOL- closed near a low
BBY- poor earnings
Earnings:
TUES JUN 15 BEFORE
BBY FDS
TUES JUN 15 AFTER
None today
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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