I grew up in Savannah, GA, but often visited the greater New York area over the years because my father grew up in the borough of Queens (about a 10 minute walk from the St. John's University campus). I made frequent trips into Manhattan with my family doing everything from touring the NBC Studios to going on the Staten Island Ferry to of course paying a visit (or 20) to the New York Stock Exchange. I eventually settled in the Chicago area and got married- as it turns out to a girl who grew up on Long Island. I was in Chicago on September 11, 2001 when the Twin Towers came down. My first visit to Manhattan after that horrible day came in early October. The city was an entirely different place with a lot of the energy seemingly sucked out of it. That energy has gradually and happily come back to the point that when I went to the since-closed Broadway show "Enron" on 44th Street between 7th and 8th Avenues recently with my wife, it was the first time I'd visited Manhattan since 9/11/01 without thinking of that day. As a father with two kids, I got a very disturbing chill when six days later, someone tried to detonate a car bomb less than 1/2 mile from where I had been. Thankfully, there were no fatalities but it brought back to mind how the markets acted in the weeks after the 9/11 bombings. Almost every gyration was sparked by a rumor of some sort- bin Laden had been captured or a terrorist blew up an ill-fated airplane which crashed in Queens a few weeks later or an anthrax outbreak was to occur. Normalcy (with time) prevailed. But normalcy comes with a price- and that is taking the risk premium for terrorism back out of the markets. That Monday morning a few weeks ago was a day in which the euro was moving and there were all sorts of worries about the Gulf Oil slick. But it was fascinating to me that the market actually took its biggest hits that day not in direct correlation with the euro or oil prices but with the news about the terrorists. There was a short covering rally in the futures when it was announced that the attempted bomber was apprehended (before the open of the markets) and the biggest dive was taken at the time when we learned that the bomber apparently had ties to Middle Eastern terrorist groups. So, an old bugaboo is coming back to trading- the terrorist premium. This will likely not be a day-to-day phenomenon (hopefully and thankfully anytime soon) so I would not let it overly dominate your thoughts in day trading. With that in mind, it was very interesting to note that the Asian markets were up on Sunday night yet the European bourses traded lower with the weakness attributed to worries about a vague takeover threat. In any case, it clearly shows that a wild currency move and oil glop in the Gulf of Mexico still cannot out-dominate headlines about terrorism as well as the fact that terrorism as a story still can move markets on any given day.
Markets in Asia were higher overnight with Hong Kong up a tinge but Tokyo was up 1.5%. The main story out there is that The Japanese government has caved and has embarked on a major stimulus program in that they look to cut interest rates to zero and buy government bonds. European markets have followed suit with the bourses generally up 0.5% to 0.75% across the board. What’s interesting is that the yen is *still* stronger. Gold is up sharply. Oil is up a bit again and bonds are up again with the 2-year yield at a new record low. Equity futures are very strong with broad support across the board. It is very disconcerting to old-fashioned me that gold is very strong and the yen is failing to react yet stocks are stronger. But all I/we can do is trade what I/we see. Thus, look for the strength to hold as the tone is so very good. Focus on the financials, the techs, the fertilizers what with the MOS earnings and POT rumors, and all relative weakness plays as the morning progresses.
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
CLDX- Reuters reported that patients with glioblastoma (a form of brain cancer) treated with CLDX’s vaccine lived nearly as long as those who received radiation and chemotherapy
VHC- closed near a high
REGN- closed near a high
GYMB- hired Goldman Sachs to explore selling the company
Bad-The following stocks have bad news and/or a weak technical pattern
MOS- poor earnings
AXP- closed near a low after the U.S. Justice Department sued AXP on antitrust charges
HURN- closed near a low after revising revenue guidance
JKS- closed near a low
STRA- closed on a low
MELI- closed near a low
TLB- cut revenue targets
Earnings:
TUES OCT 5 BEFORE
None today
TUES OCT 5 AFTER
YUM
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
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