Last week, I wrote a piece in which I discussed that in the immediate-term, the anticipated immediate-term effects of potential quantitative easing was aiding in causing the worldwide right of all asset prices from gold to oil to equities to bonds. This of course makes sense; if the Treasury is going to pump money in some fashion in buying back bonds, the demand (“artificial” or not) would keep yields low. I also noted that this type of action is difficult to sustain as something has to give. Rising gold and oil prices are often harbingers of inflation (which implies higher interest rates). Placing a lot more fiat currency into the money supply would cause a de facto devaluation of the dollar which makes the dollar cheap relative to other assets which helps to feed on itself. The problem of course is that there is no way over a long period of time that interest rates can stay down in this scenario as it ostensibly implies inflation. I bring all of this up because of a disturbing development on Thursday afternoon. The Treasury regularly holds debt auctions; last week, there were three of ‘em. A $13 billion sale of 30-year bonds was priced with a higher yield than has been the case recently and was expected to draw in buyers getting miniscule returns on immediate-term bonds. It did not happen. Investors placed bids for about 2.5 times the amount offered when there’d routinely been a factor of four. This indicates a sign of waning desire to purchase 30-year Treasuries. Very notably, bonds suffered their biggest two-day drop in a very long time with the 10-year yield mushrooming from 2.38% to 2.58% in two days. A move like this would oftentimes takes weeks for perspective as recently as 15 years ago. It may turn out to be nothing, but combined with the dollar’s descent and gold’s ascent, this is certainly a situation to monitor for the foreseeable future.
Markets in Asia were mixed overnight with Tokyo flat but Hong Kong down 1.2%. In Europe, prices are generally higher from ¼% to ½%. Oil is flat, but gold is actually down almost 1%. Notably, the dollar is up almost a full euro although little changed against the yen. Futures are little changed. Industrial Production (0.2%) and Capacity Utilization (74.8%) are out at 9:15AM with the NAHB Housing Market Index (13) out tat 10AM. Interestingly, many of the bigger names are higher this morning (AAPL, C on its earnings) in contrast with the tug down by the stronger dollar. Look for the tug-of-war to continue all day but with prices higher overall in a major stock picking day. Focus on the earnings, banks off of C, the techs off of AAPL, the myriad of small cap biotechs in the news, and the materials off of commodity weakness.
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
PIP- closed near a high after a positive blog article on Seeking Alpha in which the author made a case for the stock to go to 20
CCME- closed near a high
NEXS- closed near a high after announcing its light bulb is included on the Energy Start Qualified LED list
AGN- received FDA approval for usage of Botox to prevent migraines
MON, CF, MOS- closed near a high
ISPH- mentioned on “Mad Money” on Friday
AMZN- closed near a high
AAPL- closed near a high
GOOG- closed near a high after posting great earnings
ISTA- received FDA approval for Bromday
ARWR- announced development agreement with Smith & Nephew
ZOOM- raised guidance
AGAM- to be bought by $20.80/share by STJ
HAS- decent earnings
ASTM- to imminently begin phase III testing for CLI program
KWK- Quicksilver ruling family considering taking company private
HIHO- received tooling and product orders for mobile phone cases
Bad-The following stocks have bad news and/or a weak technical pattern
SOL- closed near a low
COF- closed near a low as monthly data released by major credit card issuers indicate a slow pace of economic recovery
GS- closed near a low
TSL- closed near a low
KDN- closed near a low
SUPX- guided 2nd qtr revenues below consensus
HAL- poor earnings
FLR- announced cost escalation on offshore wind project will impact third quarter results
NIHD- TV and NIHD agreed to mutually terminate an agreement in which TV would have acquired a stake in Nextel Mexico
PETS- poor earnings
JCP- announced shareholder rights plan
EDU- poor earnings
Earnings:
MON OCT 18 BEFORE
C EDU HAL
HAS MMR
MON OCT 18 AFTER
AAPL CCK IBM
INFN LNCR PKG
STLD VMW ZION
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
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