The Philadelphia Federal Index, according to Investopedia, is defined as such: “A regional federal-reserve-bank index measuring changes in business growth. The index is constructed from a survey of participants who voluntarily answer questions regarding the direction of change in their overall business activities. The survey is a measure of regional manufacturing growth. When the index is above 0 it indicates factory-sector growth, and when below 0 indicates contraction.” The index’s data is published and released on the 3rd Thursday of every month at 10AM by the Philadelphia Federal Reserve Bank. It is widely followed as many investors use it as an indicator as to the health of the overall economy because of the measure of activity by manufacturers. In this number-by-number age of stock market trading, the ‘Phily Fed’ indicator as it is colloquially called was the main catalyst for yesterday’s stock market sell-off. The index was expected to rise from 5.10 in June to 7 in July. Instead, the figure plunged to a reading of -7.7 which indicated not only shrinking growth but a broad miss of the expectation of leading economists. Furthermore, in breaking down the report, the level of new orders as well as the number of employees and shipment levels were well below what they were thought to be which could portend bad tidings for the September number as well. For day traders, the impact was immediate and dramatic as the major averages fell quite hard when the number was released at 10AM ET. The takeaway is two-fold. First, one must understand economic reports such as the Phily Fed; it’s one thing to se a general headline but it’s quite another to understand the meaning behind each indicator as well as how the data compares to expectations. Second, websites such as Yahoo Finance (http://biz.yahoo.com/c/ec/201034.html) publish a list of economic indicators as well as expectations for each. It is crucial that one knows the timing of each report because as was shown one more time yesterday, the effect on the stock market can be sharp and swift.
Markets overnight were down across the board with Tokyo down 2% and the European bourses ranging from 0.9% in London to 1.3% in Paris. The dollar is sharply stronger against the euro, oil is down 1.5%, gold down slightly, and bonds are up sharply with the 10-year yield approaching 2.50%. It looks to be an extension of yesterday’s losses certainly in the early going on an options expiration Friday. Look for an attempt to rally but things will likely be much as they were yesterday- a downdraft with no real oomph behind it. Much of the action looks to be in the first hour and last hour with the options expiry- and with the weather beautiful. Focus on the fertilizers, the education stocks, the earnings plays such as HPQ and DELL, and the solars off of the CSIQ news.
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
CRM- great earnings
INTU- good earnings
GPS- decent earnings
MRVL- great earnings
VRGY- decent earnings
NFLX- closed near a high
OTEX- closed near a high after posting good earnings
HSFT- closed near a high after posting good earnings
NTAP- closed near a high after posting good earnings
NTES- closed near a high after posting good earnings
TYC- being added to the S&P 500 on the close on 8/26
RBCN, CREE, FOSL- featured on “Mad Money” last night
CIS- closed near a high and had decent earnings
HRL- decent earnings
Bad-The following stocks have bad news and/or a weak technical pattern
DELL- poor earnings
BCSI- poor earnings
CSIQ- poor earnings
SWS- closed near a low after the CEO resigned
X- closed near a low as takeover speculation subsided
SHLD- closed near a low after posting bad earnings
SNDK- closed near a low after announcing a convertible notes offering
Earnings:
FRI AUG 20 BEFORE
ANN COCO HRL
SJM
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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