If I were to drive to the place I grew up (Savannah, GA), I'd ostensibly take I-95 all the way down because it is quickest and it's straight shot. If I felt l had some extra time and wanted the kids to explore a little, we could stop in a place like Washington, DC along the way. If time and distance weren't issues, I could go to places that were out of the way such as Philadelphia or Hershey, PA, or Atlanta. But I would want to wind up in Savannah so as to see the place I grew up (and my Mommy at that). No matter how I did it, I'd get there. Well, this market is in the midst of a somewhat unconventional up move with three unique factors. First, after an awful 2008 and a good 2009, the market is somewhat flat in 2010. Yet, money managers who underperformed the last two years cannot afford for their own job safety to do so again in 2010. Thus, in a vacuum of news on days like yesterday, Money Chase 2010 is on as select money managers can push stocks up when not a lot of people are around to try to capture those extra fractions of a point of gains. Second, with bond yields paltry, the incentive to take on a little risk is there. Despite this enormous month-long rally, bond yields have continued to decline as well as money floods the American markets. As for "how we get there," the 3rd thing is this continuation of a 'light volume levitation.' Volume on the QQQQ yesterday was just over 1/3 of what it was the day after Thanksgiving in 2009. Think about that. Volume was almost three times heavier on a day after a holiday in which almost nobody goes to work and one in which the market is only open for a half-day of action. But the direction was ultimately north and if you were short all day, it hurt just as much as if volume was heavy. I am no soothsayer and have no real clue with any confidence which way the market will go the rest of the year. But I do know this- on a day like yesterday when news flow is light and as we approach the final 1/3 of the year, quiet days like yesterday- with the key corollary again that there is no major news out there on any given day- have a good shot of having a bullish bias intra-day for the balance of 2010 because of the three factors described herein in this piece.
Markets in Asia were down overnight with Tokyo down 0.2%, but Hong Kong fell 1.5% and China declined almost 3%. The news out of China last night was not great as a report showed slowing of imports as well as rumors that China will require banks to provide for losses on loans held in trusts. In Europe, markets are also down from London’s 0.5% to Frankfurt’s 1%. Furthermore, commodity shares are falling across the board with oil down over 1% and gold down almost 1%. The dollar is slightly stronger against the yen but much stronger against the euro. Futures are sharply lower on all of the China news. Furthermore, as referenced yesterday, a chunk of the Friday afternoon rally was attributed to rumors of quantitative easing by the Fed, but it does not look likely to happen. Look for a sharply lower open, a very choppy first hour of trading on little liquidity and then a calmness to prevail leading up to 2:15PM ET. At that point, the results of the Fed meeting will be released and we’ll know if rumor becomes fact. If no program is announced, don’t look for much of a reaction. If the Fed downgrades its outlook for the economy somewhat sharply and announced a plan, look for a sharp reaction to the upside likely followed by a sharp reaction to the downside as the reality of the situation is assessed.
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
MBI- good earnings
IT- decent earnings
PRXL- decent earnings
GNK- decent earnings
MDR- decent earnings
CLNE - decent earnings
CTRP- decent earnings
CMFO- decent earnings
V, MA- closed near their highs
WYNN- closed near a high
BTN- closed near a high after posting earnings
GEOY- closed near a high after getting a huge contract from the National Geospatial Agency
VLTR- going into the S&P 600 on 8/16
ESRX, APKT- featured on “Mad Money” last night
FOSL- great earnings
VRTX- reported good viral cure rates in phase III Hepatitis C trial
Bad-The following stocks have bad news and/or a weak technical pattern
NUAN- poor earnings
QGEN- poor earnings
SLXP- poor earnings
THQI- poor earnings
VSAT- terrible earnings
ASEI- terrible earnings
MR- poor earnings
AMED- island reversal in closing near a low after posting earnings
DISH- closed near a low after posting earnings
MDCI- closed near a low after posting earnings
ADY- closed near a low after posting earnings
OCR- closed near a low after Moody’s downgraded its rating outlook
APEI- closed near a low
PMC- closed near a low
DGIT- closed near a low after ASCMA outlined a new electronic advertising distribution venture which would be in direct competition to DGIT’s business
SKX- closed near a low amid advertising lawsuits filed against the company
NGLS- units and notes offering
RAX- poor earnings
BBB- poor earnings
FEED- poor earnings
Earnings:
TUES AUG 10 BEFORE
AIT CVG JASO
TUES AUG 10 AFTER
AONE CREE DIS
JAZZ LDK MYGN
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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