TUES. MAY 10- Strong Bonds

There’s been a somewhat strange occurrence in a pretty wild market environment. I’ve discussed silver and commodities in detail recently. The stock market continues to hang in there. The dollar has weakened against the yen but strengthened against the euro on the commodity weakness. But what has also been very noticeable has been an inordinate amount of strength in the bond market. The 10 year yield on the U.S. Treasury bond is now down to about 3.15% as the yield has declined in every type of market in recent weeks. What is strange about it is the buoyancy of the stock market, a jobs market that seems to be perking up if one is to believe Friday’s unemployment figures, and the Chinese have been paring back their holdings of U.S. Treasury debt. So, what gives? Well, usually a strong bond market portends a weakening economy. Is that the case? It can also indicate the U.S. Treasury going more towards “all in” in attempting to massage interest rates because even the slightest uptick in rates can cause a massive issue for the economy in terms of just paying interest on said debt. Or is it because the U.S. is being viewed more and more as the strongest economy in the world (or at least a safe haven) in the face of a weak Japan and Europe as well as Middle East turmoil? Well, gee, if I knew the answer to this, I’d take out a 2nd mortgage on my house and bet it. I simply bring it up because bonds have had quite the exaggerated move and as the 10-year heads back toward 3%, it certainly portends another reason for the stock market to remain increasingly volatile for us day traders.

Markets in Asia were mixed overnight with Tokyo up 0.3% but Sydney down 0.6%. Bourses in Europe are snapping right back from yesterday with moves of 1.3% to 1.6% to the upside prevalent. Commodities too continue to rally in general with metals up 1%-2% although oil is down a little after the margin requirement was (unsurprisingly) raised. The dollar is flattish. Import data came in notably inflationary with Wholesale Inventories (1.0%) out at 10AM. Futures are nicely higher. As long as things hold steady in commodities land, the markets should hold as well albeit on relatively low turnover. The focus will likely be on the earnings plays, momentum movers from yesterday if the market gets going, and relative strength/weakness plays.

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

NFLX- closed near a day amid rumors it is on the verge of making inroads into Latin America

ROSE- closed near a high after posting good earnings

DTG- closed near a high after receiving an increase takeover bid

JOYG- closed near a high

MCP- closed near a high

WLT- closed near a high

CLF- closed near a high

VRTX- closed near a high

PCLN- closed near a high

LULU- closed near a high

WTW- closed near a high

FEIC- closed near a high

MED- good earnings

ATVI- decent earnings

YONG- decent earnings

DF- good earnings

FOSL- good earnings

NOG- decent earnings

Bad-The following stocks have bad news and/or a weak technical pattern

MOBI- closed near a low after posting poor earnings

HW- closed near a low after posting poor earnings

PANL- bad earnings

BID- poor earnings

CLNE- poor earnings

RAX- poor earnings

MNKD- poor earnings

NSPH- share offering

ATPG- poor earnings



Earnings:


TUES MAY 10 BEFORE

BR DEER DF

DYN EBIX EPD

FOSL IRDM JASO

JRCC MDC NOG

TM WEN

TUES MAY 10 AFTER

DIS MBI MCP

MDR NUAN ROVI

SGMS SSRI STEC

URS WX




Epiphany Trading, LLC
www.epiphanytrading.com

Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President