For those of us who are homeowners, we all remember the first time we bought a house. It was a bit of a harrowing experience with a myriad of documents and many things that had to be done to allow the sale to proceed. One of these things was the home inspection. The ‘home inspection’ game to me is about as good as the ‘notary game.’ About anybody can be a notary; about anybody can be a home inspector. So, when you go to buy a house if you choose an inspector rather than an engineer, you’re gambling with whom you go with; many are good, but others just aren’t. A very poor home inspector could tell you that your home looks good externally, but there may be tremendous rot underneath it. Well, if there is a lot of wood rot, what does that truly denote about the state of your home where you’re planning on residing for a number of years? I could also use the same analogy with a military force. You can have the most incredible generals on the planet yet if the soldiers aren’t of high quality, your plan cannot get executed- although your soldiers most certainly will get executed. Well, it’s the same thing with the stock market. When this market rally started, financials stampeded out of the gate. Techs took over thereafter. But really was impressive was the sheer amount of stocks that went with the rally. On Friday, following Thursday’s rough performance, the Dow was down 70 points yet came back gradually to trade most of the day within a low fraction of a percent of unchanged with the S&P 500 in tow in trading a tad weaker as well. Stocks like Apple (AAPL) charged higher. Yet, there were more than three stocks down for every two up. There were fewer generals to hang with AAPL and the soldiers decided not to go to war for the day. Put another way, the wood beneath the damp wood of a down 25 point Dow day rotted a bit. This poor breadth of the market is certainly something to monitor as time progresses and the market corrects. We’ll have retail data out this week which may lend some support if it inverses the negative conclusions drawn from the employment data last week regarding the bounce (or lack thereof) in the economy. But the trend of the breadth as we saunter into mid-October and the final earnings season of the year is going to truly tell the tale for the next few days and weeks so monitor it every day.
Overnight, markets in Asia were mixed with Tokyo down 1/2% and Hong Kong up 1/3%. Markets in Europe are up very slightly. Oil is down 1%, gold and bonds are flat, and the dollar is slightly stronger against the yen. Equities in the U.S. are strong on the heels of a number of brokerage upgrades in the financial and technology sectors. Look for a quieter day than Thursday and Friday were. There is a decent tone to things. Expect a little selling into it, but if the pressure is light (likely), we'll probably have a marginally choppy up day today. There are a number of biotech stocks in the news; focus on those as well as assorted other minicaps. Keep in mind also that the action focus is going to shift to earnings very soon.
Watch list:
10052009Eriklist.zip
Reiterating-
Please understand that if the ideas do not get to the hoped for set-ups cited below, more often than not, one should not blindly trade the symbol next to said idea.
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
TLCR- the two-day old IPO closed near a high
RINO- closed on a high after being recommended in the Cabot China newsletter
YONG- announced significant expansion in their 2010-2012 strategic plan on Friday morning; closed near a high
TER, WMS, XLNX- noted on “Mad Money” on Friday night
AIG- closed near a high
VG- announced its first mobile calling applications for smartphones are now available for download for the iPhone and Blackberry
RIMM- upgraded by Needham; AAPL should move along with it
WFC- upgraded by J.P. Morgan
PPHM- reported positive phase II Bavituximab lung cancer data
IPXL- granted tentative FDA OK for Flomax ANDA
ALTH- announced Folotyn available for sale in U.S.
CRXX- drug candidate Prednisportin acquired by Sanofi-Adventis
DEPO- reported positive top line phase III results from DM-1796
RPM- good earnings
BRCD- put itself up for sale
Bad-The following stocks have bad news and/or a weak technical pattern
FOLD- poor phase II trial results of its Gaucher disease drug
SCLN- poor phase II trial results of its RP101 pancreatic cancer drug, but unlike FOLD, they insist the failure will not impact earnings
SMSC- issued weak 3rd quarter guidance on Thursday afternoon; closed near a low on Friday
SGEN- discontinued Seagen Mariner trial as phase IIb trial failed
Earnings:
MON OCT 5 BEFORE
RPM
MON OCT 5 AFTER
MOS
Good luck today.
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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