FRI. OCT. 15- Knowing When NOT To Trade

When I first learned to drive a car, I was very nervous but very excited. My father took me to the parking lot of a local school and I practiced driving around in a circle, starting/stopping, parallel parking, and so forth. The first time I drove on a city street in traffic was nervewracking for me but exhilarating. Obviously, over time, driving has become much more mundane. Yet there are still circumstances I will never drive- in a blizzard, in a hurricane, when taking medication after surgery, and so forth. Furthermore, when I’m really bored (which really doesn’t happen much these days with work and two kids soaking up all my time!), I also don’t randomly get in a car and drive simply because there are much better things I can be doing. These analogies were both very much in place yesterday in the markets. The first one took place both in the morning and hen in selected instances in the afternoons. For scalpers who are trading major financial stocks, the biggies such as BAC and C began dropping just below the open. Nobody knew (nor could find) any real news. Well, in that blizzard, why try to drive out in the middle of it? Why not wait a little bit, find out what’s going on, and then trade? Another example would be the cases of things like TGB and GMCR which had huge moves suddenly. For those with ordinary news services, the moves already occurred before one could procure the event that sparked the major move. But why play aftershocks if one doesn’t know what is going on? Regarding the latter analogy, there was a pocket for about 1 ½ or two hours in the early afternoon when stocks weren’t moving dramatically. So, why try to create something out of nothing? The net is this: knowing when to trade is obviously very important. But knowing when not to trade is even more important so that you don’t gamble your day (or week or month or year) away.

Markets in Asia were lower overnight with Tokyo down 0.9% and Hong Kong down 0.4%. In Europe, prices are more mixed with London flat but Frankfurt up 0.8% It has been a wild morning already in the external markets with oil now up slightly but well off its highs, gold flat but down from up $10, the dollar marginally weaker but up from its lows below 81 yen, and the 10-year yield hovering at 2.50% but off of its high as well. CPI, retail sales, and NY Empire all came in pretty good. Michigan Sentiment is out at 9:55AM ET. Bernanke’s speech commencing at 8:15AM straddled a fine line but the message was that he left the door open for quantitative easing in implying it may well be needed and can be handled. Futures are sharply higher as the markets got what they wanted plus earnings and merger mania are in full effect. The upside likely maintains itself today, but keep a weary and tired eye on currencies and gold for true direction. Focus on STX and the stocks in its sector, GE, earnings plays, GOOG, techs for major moves particularly relative weakness, and the fertilizers on the rumors surrounding POT.

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

GOOG- blockbuster earnings

AMD- decent earnings

STX- announced interest for potential going private transaction; WDC, XRTX, STEC, NTAP, and SNDK may move in sympathy

MBI- closed near a high

ZAGG- closed near a high after boosting revenue guidance

STV- closed near a high

AAPL- closed near a high

SMSI- closed near a high

MNKD- mentioned on “Mad Money” last night

HWK- received takeover offer from CSL for $50/share

SHMR- received offer from Essilor to acquire 50% of company for 14.50/share

FHN- decent earnings

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

CBST- poor earnings

GS- closed near a low

HRB- closed near a low on continued worries over the burgeoning foreclosure scandal

MOTR- closed near a low

SMED- closed near a low after a negative report from a web service

JOE- closed near a low on continued fall-out from the Einhorn report on Wednesday

WGO- closed near a low after posting earnings

TOWR- IPO for 6.15 million shares at 13, below expected range of 15-17

POT- rumors floating from various news reports that Sinochem will no longer counterbid for POT

GE- poor earnings

INFY- poor earnings

MAT- poor earnings

Earnings:

FRI OCT 15 BEFORE

FHN GCI GE

GPC INFY MAT

SCHW



Epiphany Trading, LLC
www.epiphanytrading.com

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