On February 27, the nation of Chile suffered one of the worst disasters in modern history with an 8.8 magnitude earthquake slamming the nation. The only good news to take from this is that the earthquake’s epicenter was about 200 miles southwest of Chile’s capital (Santiago). Few people realized that the Santiago airport resumed operating on the Monday after the Saturday quake and the Santiago stock market reopened that day without so much as a delay. Even more amazing to most people is the fact that as the world focuses on the myriad of problems in Europe, the Santiago stock market actually closed at a record high on Tuesday! Not a crash recovery high…an all-time high. Chile introduced dramatic free market reforms ironically enough during the Pinochet days of the 1970’s. The first democratic government (run by Patricio Aylwin) took over from the military in 1990 and continued to develop and implement the economic reforms along with all governments since then. Furthermore, unlike Greece or Spain, Chile has stuck to its reforms and made every effort to avoid debt. For instance, President Bachelet came under much pressure after being elected in 2006 to spend Chile’s windfall monies from sky-high copper prices. Thus, when the worldwide crisis came in 2008, the Chilean government was able to implement one of the world’s largest stimulus programs. While it is true that copper is as important to Chile’s economy as oil is to many other economies, it is also a truism that Chile held its own when copper prices came in whereas economies like Venezuela encountered many problems when oil prices cracked. Without going into the ins and outs of the Chilean economy, it is important for all traders to note that there are spots of success in the world which have not been crippled by debt. It is true that most eyes tend to be focused onto the euro and the streets of Athens and Madrid. But the truth of the matters is that these nations do not make up the whole worldwide picture when in fact countries like Chile are in South America rather than Europe. So, while there does not seem to be an immediate-term day trade here, one should be aware of the whole worldwide picture rather than just the problems of Europe and nations like North Korea when watching things that can affect the domestic American stock market such as commodity prices and/or the tug of the influence of a world basket of stocks…which of course has to include some Chilean equities.
Markets in Asia were higher overnight with Tokyo up a robust 2.7% and Hong Kong ahead 0.6%. In Europe, the trend has shifted with Frankfurt off 0.2% and London declining by 0.6%. Oil is down ½%, gold declining 0.3%, and the dollar is slightly weaker across the board. Futures are mixed with the S&P’s down slightly but the NASDAQ up a bit based on INTC’s good earnings. It’s a bit of a warning sign that the broader tape is not rallying with the techs, but we’ve had a huge six-day rally. For today, look for a very choppy day with an attempt to rally early. The veracity of that short covering attempt will set the tone for the balance of the day with some light profit taking likely. Focus on the earnings plays and their derivatives (i.e. INTC and the other semis for instance), the drillers, and relative weakness plays in particular early in the session.
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
INTC- great earnings
EXPD- great earnings guidance
GS- closed near a high
AMZN- closed near a high
AIG- closed near a high after announcing investor Bruce Berkowitz built his stake in the company
ADS- closed near a high
LTBR- closed near a high
OREX- closed near a high
OREX- closed near a high
CTFO- closed near a high
EBS- closed near a high and announced HHS contract
BRK/B, JBL, NVDA- mentioned on “Mad Money” last night
ADTN- decent earnings
ASML- decent earnings
SNDK- signed joint venture agreement with Toshiba
ASYS- preannounced positive 3rd quarter earnings guidance
Bad-The following stocks have bad news and/or a weak technical pattern
YUM- poor earnings
NLY- share offering
WTNY- announced higher than expected loan-loss provision for 2nd quarter
FAST- closed near a low after warning on earnings
MOS- closed near a low
CERN- closed near a low after announcing earnings guidance
RIG- closed near a low
GTIV, LHCG- announced SEC is probing Medicare payments
Earnings:
WED JUL 14 BEFORE
JTX
WED JUL 14 AFTER
LSTR MAR
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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