On May 2, 1969, the maiden voyage of a grand ship commenced from Southampton (United Kingdom) to New York City. It took almost five days to sail across the Atlantic with Prince Charles the first civilian passenger aboard the great ship. The ship was heavily utilized in the 1982 Falklands War. In later years, the ship was given a multimillion dollar refurbishment with it eventually going on almost 1,200 miles, having carried over two million people, and having sailed over five million miles. There’s actually a tremendous amount of fascinating history involving this ship- named the Queen Elizabeth 2 aka QE2. Well, over the last few weeks, the moniker “QE2” has taken on an entirely new meaning. For those who don’t know, quantitative easing is a monetary policy utilized by central banks when they want to raise the money supply by increasing the ‘overage’ of the other banks, i.e. piling more paper (or electronic) fiat into the banks. The idea is discussed when all of the traditional vehicles to influence the money supply such as lowering interest rates have failed. It works by ostensibly creating money out of nothing and then does thing like purchase government bonds from banks which infuses the system with fiat currency. No matter what anyone thinks of the policy, it is highly likely to be implemented today at the conclusion of the two day Federal Reserve meeting. TARP was QE1 for anyone who doesn’t remember. In any case, the markets have built in a big program (think a $500-$700 billion plus bond repurchase based on the chatter in papers such as the “Wall Street Journal,” “The New York Times,” “Washington Post,” and so forth). Thus, the size, stature, and composition of said QE2 package will potentially have a dramatic impact on trading for sometime to come with the most immediate-term impact coming just after 2:15PM ET.
In Asia, markets were higher overnight with Hong Kong up 2%. The trend was the same in Europe with Frankfurt and London both up 0.2%. The dollar is marginally mixed with gold and oil both ahead nicely. ADP came in stronger than expected at 8:15AM ET (43K vs 23K expected), ISM Services (53.4) and Factory Orders (1.7%) are due out at 10AM, Crude Inventories at 10:30AM, and Auto and Truck Sales at 2PM. The biggie of course is the FOMC Rate Decision due out at 2:15PM. Futures are a bit higher. The election results came in about as expected. The QE2 talk is beginning to settle in now with a widespread expectation of a minimum $500 billion program with some language about more buying if need be. Look for a fairly slow trading session for the bulk of the day with prices hovering in positive territory. Pay rapt attention to the numbers at 2:15PM with particular attention to the language…seek phrases like “$500 billion bond purchase” and “we stand by monitoring the situation closer ready to buy more.” The focus through 2:15PM will be on the casinos, the earnings plays, PDE and all of the stocks in its sector based on the potential for a buyout, and big cap tech. After 2:15, look for very fast and illiquid conditions on momentum with a focus on relative strength and weakness with a time horizon of seconds for a trade. Up until 2:15, pick spots and be comfortable trading with size with need be; after 2:15, no matter what, cut down on size if trading for immediate-term moves due to the likely increased volatility.
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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
DIN- closed near a high after posting good earnings
MHS- closed near a high after posting good earnings
CGNX- closed near a high after posting good earnings
AMSC- closed near a high after posting good earnings
IVAC- closed near a high after posting good earnings
WTI- closed near a high after posting good earnings
NTRI- closed near a high after posting good earnings
APC- closed near a high after posting good earnings
BORN- closed near a high
BIDU- closed near a high
AAPL- closed near a high
LVS- closed near a high
MCP- closed near a high
HIG- good earnings
STEC- decent earnings
OPEN- phenomenal earnings
OKE- decent earnings
PBI- decent earnings
TRMB- decent earnings
RADS- decent earnings
SNCR- decent earnings
AMZN, FFIV- featured on “Mad Money” last night
PDE- reviewing strategic options following new Seadrill (of Norway) approach
SNCR- decent earnings
WWWW- decent earnings
TAL- closed near a high after SAC capital reported a 8.7% stake in company
TORM- closed near a high
ESRX- closed near a high
WBSN- closed near a high
OSG- closed near a high after posting good earnings
AET- decent earnings
Bad-The following stocks have bad news and/or a weak technical pattern
RTI- closed near a low after posting bad earnings
OEH- closed near a low after posting bad earnings
EOG- bad earnings
CTRP- bad earnings
ERTS- poor earnings
LEAP- poor earnings
LNC- poor earnings
SONS- poor earnings
CQB- poor earnings
DISCA- poor earnings
PLT- poor earnings
NANO- poor earnings
HCP- share offering
CIM- share offering
BIO- uncovered accounting irregularities
CVS- poor earnings
GRMN- bad earnings
JRCC- poor earnings
PWR- poor earnings
TGB- Canadian regulator rejected a mine plan of the company
Earnings:
WED NOV 3 BEFORE
AET AGU ANR
AOL ARE CTL
CVS DVN EP
GRMN JRCC MGM
PHM PWR Q
RRD SPW TDW
TRW TWX WLP
XEC
WED NOV 3 AFTER
AMLN BGC CAR
CNW CVD DOX
FRPT FRT GNK
HCN IPI IT
JCOM LBTYA MELI
MPWR MUR ONXX
PL PRE PRU
QCOM RIG THQI
VCLK WFMI
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
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