So what happened yesterday? There were two main triggers. The major factor was The less-important factor was a faster-than-estimated growth indicator in the Institute for Supply Management’s measure of service industries. This better than expected data helped provide a cushion for those in the camp who believe that the economy is perking up. If the service industries are showing good growth, it obviously bodes well for the entire economy. But the major issue came straight outta Tokyo. They announced that they were cutting interest rates to zero and considering buying government bonds heavily. In turn, this helped lend support to the thought that other world governments would do the same thing. This is basically an overt de facto devaluation of paper currencies. But it is bullish for bonds, gold, and oil which all rallied yesterday. The tonic is great for stock prices certainly in the immediate-term also because it makes investors want to take a bit risk plus it makes stocks look relatively cheap as all of these flood of money has to go somewhere. Thus the combination of bettering prospects for the economy along with the government action provided the perfect recipe for an immediate-term ascension in stock prices- which is exactly the type of levitation that occurred yesterday.
Markets in Asia traded sharply higher overnight in the heels of Wall Street’s rally yesterday with Tokyo up 1.8% and Hong Kong up 1.1%. In Europe, prices are higher despite a downgrade of Irish debt with London and Frankfurt both up about ¾%. Gold is up ½% again, the dollar is marginally weaker, oil is down slightly, and bonds are nicely ahead with the 10-year yield now at levels not see since January 2009 as the 2.40% level is threatened. The ADP report came in worse than expected with a loss of 39,000 jobs versus a gain of 10,000 jobs expected. Weekly crude inventories are due out at 10:30AM. Futures are ostensibly flat. This is great considering the gains the market made yesterday along with the double shot of bad news this morning. This is a morning where the first hour will truly be key. If the markets open a touch lower or flat and fail to go down in the first few minutes, look for a rapid short covering momentum rally. If the rally fails to materialize early, look for a mild profit-taking down session. The focus will be on the fertilizers, the network neural data center services sector with EQIX down a lot (SVVS, RAX, et al), the box retailers with COST having posted poor numbers, and relative strength plays early in the day.
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
VHC- closed near a high
TV- closed near a high
GS- closed near a high
FCX- closed near a high
CLDX- closed near a high after a positive report on its brain cancer vaccine
AMZN- closed near a high
AAPL- closed near a high
SNDK- closed near a high
GYMB- closed near a high upon confirmation is trying to put itself up for sale
BIDU-closed near a high
V- closed near a high
CF- closed near a high
BUCY- closed near a high
CLX- featured positively on “Mad Money” last night
VECO- closed near a high
CCRT- closed near a high
HSTM- closed near a high
FDO- raised earnings guidance
Bad-The following stocks have bad news and/or a weak technical pattern
EQIX- abominable earnings warning; SVVS, TMRK and RAX trading down in sympathy
TLB- closed near a low after issuing an earnings warning
OPEN- featured negatively on “Mad Money” last night
DMND- poor earnings
CML closed near a low
IRM- closed near a low after issuing an earnings warning
COST- poor earnings
Earnings:
WED OCT 6 BEFORE
COST MON RPM
STZ
WED OCT 6 AFTER
MAR RT
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
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