One of my best friends (someone who happens to be in my trading office) currently has 822 friends on Facebook (compared to my unpopular total of 233 friends). I don’t know if I’ve spoken to 822 people in my life so my hats off to this gentleman for being so well-known and loved! In any case, I randomly selected 30 people from his list and looked to see things like how many of them I knew (0) although we have 22 mutual friends in common. I then looked at my own list in picking the first 30 people on my friends list upon clicking ‘see all friends’ in at random in studying details like male-female ratio of the sample and then all of my friends. And yes, all in the name of research, right? In any case, I found that of the sample, 20 were female and 10 mile while I actually have 118 female Facebook friends overall, 113 male Facebook friends overall, and two who are entities. Thus, the samples in both cases both gave me false reads of the true representation of the overall picture. The guiding similarity to trading is that most people from the average investor to the average equities day trader is attuned to monitoring the Dow Jones Industrial Average (DJIA). As it turns out, there are only 30 stocks in the DJIA. A particularly positive or negative story can dramatically impact the average then as there is a multiple of about 10 to 1 for Dow points to a point of an individual stock’s move. In comparison, a broader index such as the S&P 500 is market-capitalized weighted so while the bigger companies move the average more than the smaller companies, it is a much more representative sample of Americana. I ring this up because of Wednesday’s action in International Business Machines (IBM). IBM closed ahead just over 5 points after posting great earnings on which boosted the Dow by 45 points. The Dow closed down 12. Yet, the broader S&P 500 had its worst day on Wednesday since mid-November in finishing down in excess of 1%. Thus, as you trade, make sure you monitor the Dow because everyone else is as well which does have some sort of psychological impact…but know that the real story of the tape lies in the performance of the S&P 500.
Markets in Asia were down overnight with Tokyo falling 1.5% and Hong Kong down 0.5%. The tone, however, is better in Europe with yields on Spanish debt declining leading to gains for stocks of 0.6% in London and 0.8% in Frankfurt. Gold and oil are down slightly, the dollar is marginally weaker, and bonds are quiet. Futures are positive on the heels of a benign Europe and good numbers out of Europe. There’s no economic data today and monthly options expire on the close. With a few inches of snow on the ground and a Friday session in the midst of a packed week, look for an active open but it should slow down fairly rapidly thereafter. The tone should remain strong most of the day with the focus on the financials (BAC down but GE up), oil services off of SLB’s earnings, techs on the equity rebound and GOOG’s earnings, and small biotechs in the news such as VVUS.
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
TPX- decent earnings
MXIM- decent earnings
PLCM- good earnings
CYN- decent earnings
EZPW- decent earnings
GOOG- good earnings, but CEO leaving
ISRG- great earnings
DNBK- being bought out for $23/share in cash or 1.624 shares of PBCT
WBKC- closed near a high
MSHL- closed near a high
KCG- closed near a high after posting good earnings
ESI- closed near a high after posting earnings
FSLR- closed near a high
X- closed near a high
WMG- closed near a high amid a report that Goldman Sachs has been hired to seek potential buyers
GE- decent earnings
SLB- decent earnings
NOVA- to be bought for $13.25/share by Surgery partners
CYTX- announced presentation of data demonstrating a statistically significant reuction in ventricular tachyarrhythmias following ADRC therapy in patients with acute heart attack
Bad-The following stocks have bad news and/or a weak technical pattern
COF- poor earnings
SWKS- lukewarm earnings, but was featured on “Mad Money”
SYNA- poor earnings
ELX- poor earnings
IGT- poor earnings
PBCT- poor earnings
JNY- poor earnings
PH- closed near a low after posting bad earnings
APKT- closed near a low
BAC- poor earnings
VVUS- ordered by the FDA to release more information concerning birth defects with its Qnexa drug
ACOR- Biogen reported European regulators have recommended against approval of its multiple sclerosis drug Fampyra
Earnings:
FRI JAN 21 BEFORE
APD ARG BAC
BBT FHN GE
SLB STI
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
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