I'm going to post this a little early as it is very important with the follow-up tomorrow morning:
Tuesday 5:30PM ET
The stock market got absolutely hammered today. Overnight on Monday night, there was a revision of a leading economic indicators number in China as well as a weak industrial production number in Japan. The trouble was shoved on to Europe as debt spreads widened anew with the likelihood of default in many of the poorer nations rising sharply. But that was yesterday. What will likely tell the story tomorrow is exactly how the broader averages react to some European Central Bank mechanisms. Namely, tomorrow morning, the European Central Bank will offer Europe’s banks three-month loans ahead of having to repay the equivalent of $540 billion to the ECB as a key tenet in the ECB’s attempt to fight the financial crisis. The demand for the three-month monies will likely indicate just how much banks are still relying on the European Central bank for immediate-term funding. This announcement will be made around 5:15AM ET Wednesday morning. Because market rates are lower than the 1% currently charged by the ECB, only banks with very limited access to cash will be in on the auction as banks can borrow three-month funds from one another in the marketplace at a rate of around 0.75% currently. But financial institutions are very worried about lending to one another because of Europe’s sovereign debt crisis. Should demand be very high, it will indicate that banks are still finding it very hard to fund themselves. Thus, the auction will set the tone for the day in Europe as it will be a pretty good measure of the immediate state of the banks.
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Markets fell in ASIA with Tokyo down 2% and Hong Kong off 0.6%. The trend, however, shifted in Europe as the news from the ECB was good with banks formally requesting much less money than was forecasted by the general consensus. Thus, the immediate-term implication is that the weaker banks aren’t in quite as bad a shape as many thought they were. In turn, this changed the broader market outlook with the euro rallying almost 1% and London and Frankfurt both rallying about 0.5%. Things were lookin’good…and then the next domino this morning fell when ADP data came in worse than expected portending a negative jobs report on Friday. As of this writing, the European bourses have lost all of their gains and futures have come all the way in as well. As the futures really failed to go deeply negative with the pounding everything has had and as it is the end of the quarter, look for a little bounce today. Trading will be very choppy, but there does seem to be a concerted effort for a little lift this morning. The plays will be in the fertilizers with MON having reported, the big cap techs as the RIMM/AAPL war heats up, and the relative strength/weakness stocks with the markets likely to be thrashing around all day.
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
TSLA- closed near a high on its IPO debut
AZN- closed near a high after a judge upheld the company’s patent for Crestor
ABII- announced deal with CELG which values ABII at 58 cash plus .2617 CELG shares or about 72 based on last night’s CELG close
STST- announced deal to be acquired by BA for 34.50 in cash
MON- decent earnings
Bad-The following stocks have bad news and/or a weak technical pattern
GIS- poor earnings
ZZ- poor earnings
CLF- closed near a low
RIMM- closed near a low after rumors of an AAPL/VZ deal
RIG- closed near a low
DNDN- closed near a low
V- closed near a low
WYNN- closed near a low
MEE- closed near a low
BA- closed near a low
BTU- closed near a low
BKS- closed near a low after posting terrible earnings
DNDN- closed near a low
Earnings:
WED JUN 30 BEFORE
AYI MON
WED JUN 30 AFTER
APOL SCHN SWHC
WOR
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
Joseph R. McCandless- Managing Partner
D. Timothy Seaquist- Managing Partner
www.epiphanytrading.com
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