I want to go into something I touched upon a couple of days as I’ve been asked a lot about it. It’s a very very very important concept. For any of us kids who collected baseball cards growing up, we all knew about the Honus Wagner baseball card. Honus Wagner way back in 1911 asked that his baseball card stopped being made because the manufacturer was a tobacco company with Wagner not wanting kids to smoke cigarettes. There were only about 100 of these cards distributed to the public with one of them sold in July 2007 for $2.8 million. Mind you, this is but a piece of cardboard with many other cards from other players ostensibly worthless because of the prevalence of production. Perhaps a better example of the point I am going to try to make is the recent phenomenon of school districts handing out incentives (with business partners) to school kids for getting good grades. Whether it be an iPhone or just cash, there’s an added bonus for getting good grades besides the obvious theme- getting ahead professionally in life! But if everybody got good grades, it’d cheapen the grades- and likely make the incentives go away. Well, in a manner of speaking, this is what is going on stock-wise right now along with the external markets. Yes, it is indeed hard to argue with some signs of economic pick-up whether it be a positive ISM, a downtick in foreclosures, or an uptick in temporary jobs. But what the proposed quantitative easing program put in place by the Japanese government last week along with hopes for a similar one state-side is produce more baseball cards so to speak. That is, it makes paper aka fiat currency worth less (thus the decline in the dollar) while making harder commodities worth that much more thus the rise in things such as gold and oil. Furthermore, since stocks are ‘paper’ assets, they rise in value too as more and more money (paper) is pumped into it- even if their relative value to things like gold is not maintaining itself nearly as much. One therefore can get an immediate-term phase where prices of all assets can rise. This where we are. Whether this is artificial or long-lasting is not something I can easily answer, but as a day trader, I am cognizant that the delta of moves is certainly increasing and I for one will continue to trade accordingly.
Markets in Asia were mixed overnight with the Chinese stock market rallying 3% after having been closed for the week for a holiday, Hong Kong was up 0.3%, and Tokyo was down 1%. In Europe, markets were down overall last night but have rallied back in also performing a mixed performance with the averages trading anywhere from down 0.3% in London to up 0.2% in Frankfurt. The jobs report data came in negatively overall, but the private number was in-line. The reaction has been wild with the dollar weaker, bonds down a bit, and gold up 1%; futures were down 100 Dow points but are now higher as of this writing as equities moved with the dollar. Look for a very choppy day on a very choppy report. Trading should be centered upon the mixture of news in the tech sector, the earnings, the various downgrades, and relative weakness plays if the markets open higher but fail to rally in the first few minutes.
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
AA- decent earnings
DRWI- raised revenue guidance
SCSC- good earnings
TTO- decent earnings
BORN- closed near a high
EQIX- closed near a high
MMR- closed near a high
RSTI, ATNI- going into S&P indexes; RSTI in the 600 on 10/12 and ATNI into the 600 on 10/14
GEDU- pricing 6.375 million share IPO @ 10.50, near high end of 8.50-10.50 range
Bad-The following stocks have bad news and/or a weak technical pattern
MU- poor earnings
ONXX- delaying new drug application for Carfilzomib after the FDA asked for additional information relating to manufacturing the drug on a commercial scale
CYTX- share offering
KLIC- earnings warning
GMXR- closed near a low
STRA- closed near a low
EFC- pricing 4.5 million share IPO @ 22.50, near low end of 22-24 range
AMZN- removed from Conviction Buy List at Goldman Sachs
FFIV- downgraded to Sell at Goldman Sachs
Earnings:
None today
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
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