WED. OCT. 7- Down Under

I was fortunate enough to have had a 2 ½ week honeymoon in Australia and New Zealand. I will never forget that wonderful experience. To this day, I have such incredibly vivid memories of the hot springs in New Zealand, the sheer beauty of Sydney, the vastness of the Outback, and the crystal clear waters surrounding The Great Barrier Reef. Thus, I always pay special attention to Australian news as I left a little piece of my heart in that country. This is why a little headline about the Reserve Bank of America caught my eye about 5AM yesterday morning when I searched for reasons why the markets had rallied strongly everywhere in the world post-Tokyo close. The Reserve Bank of Australia raised the overnight cash rate target to 3.25% from a 49-year low of 3% as the governors of the equivalent of their Federal Reserve note that manufacturing in emerging markets increased substantially in the last few months. But the very fact that an industrialized nation sought to raise rates amid worries of a pick-up in inflation much less excessive growth provided an adrenalin boost to the equity markets. The reason is quite simple: investors and money management firms worldwide are now perceiving the economic recovery as genuine simply because a major nation is trying to slow its own growth! As the breadth of the equity rally improved (see Monday morning’s blog), the rally fed on itself throughout the world. As time progresses, look for a few more of these rate increases; the way the market reacts in the immediate-term will give a genuine clue as to the likely longer-term trend of stocks.

Markets in Asia were up nicely overnight with Tokyo up 1% and Hong Kong 2%. European bourses are hovering around unchanged. Gold and oil are mildly higher with the dollar getting drilled again although off of is lows. Futures were up early on, but have been coming in as the dollar has come back. Today will be much choppier than yesterday with the equities following the dollar and gold. Look for trading on both sides of unchanged with volatility back again. Trade the microcaps, small biotechs, relative strength plays, and earnings plays.

Watch list:
100709Eriklist.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

YUM- decent earnings

ANGO- decent earnings

RIMM- closed near a high

TSRA, V- mentioned positively on “Mad Money” last night

UA- upgraded to a ‘Neutral’ at Piper Jaffray, but price target is 26- below current price…yet stock was up a dollar after-hours yesterday

STAR- closed near a high

AU- among gold stocks closing near yesterday’s high

PUDA- closed near a high

VICL- positive phase II trial results for TransVax CMV vaccine

VRSK- IPO- priced 85.3 million shares at 22

FDO- decent earnings

COST- decent earnings

RPRX- says Androxal restores normal sperm counts in Hypogonadal men

DDSS- FDA letter says deficiencies at a manufacturing facility have been rectified


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

AAI- announced a share offering

SUN- cutting dividend and furloughing employees in idling a manufacturing facility

LINE- share offering

MNKD- closed near a low after announcing it will not partner on its Afresa before year-end

CIEN- closed near a low after announcing it may bid for NT assets

MERX- poor earnings

CAR- offering $250 million in convertible notes

IRDM- closed near a trend low



Earnings:

WED OCT 7 BEFORE

COST FDO MON

WWW

WED OCT 7 AFTER

AA RT




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