Two of the major indicators of an extended bull's market strength at the beginning of a year tend to be the level of merger activity and number of initial public offerings coming to market. In this case, the major averages are up sharply (many in excess of 80%) since their March 2009 lows. Thus, in theory, value is harder to find. Yet there actually tends to be more of a clamoring for merger activity as stock prices rise because there's a widespread belief that good times will be around for awhile. If that is the case, adding a good business can be a very profitable venture for a company or fund. Furthermore, there is a desire for entities to raise money equity-wise rather than a bank in rising markets because it keeps debt off of a corporation's books. After what is usually a quiet period in December and the first few days of January, it is expected for merger and IPO activity to pick up. It is particularly important this January as those two indicators will likely be good barometers of the market's health after its rise as they will show the true demand out there for stocks much less business in general. So particularly over the next few weeks, keep an eye on the headlines for more corporate activity on a day-to-day basis as one can learn a great deal about the true interest levels in corporations much less make trades off of whatever merger and IPO activity is out there.
Markets overnight were strong throughout the world with Tokyo up 1.4%, London ahead 0.7%, and Frankfurt tacking on 1%. The external markets are all relatively quiet with gold and oil down slightly, the dollar mixed in trading down a little against the yen but up a little against the euro, and bonds are little changed. Futures continue to indicate a stronger market. Most of the same-store sales data was a little worse than expected which gives some pause but jobless claims data was stronger than expected. Look for a very choppy day overall with a slight positive upside bias. The focus will be on the small caps in the news, the myriad of retail sales data, the fertilizers, and big cap tech.
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
LCAV- closed near a high after posting good earnings
IEC- closed near a high
BIDU- closed near a high
MOS, POT- closed near a high after MOS posted good earnings
RIG- closed near a high
SNDK- closed near a high
AAPL- closed near a high
MA- closed near a high
RIMM- closed near a high
YOKU- closed near a high after announcing a deal with Warner Brothers
RT- decent earnings
SCOK- closed near a high
PANL- closed near a high
BSFT- closed near a high
N- closed near a high
MU, AKS, SWN- featured on “Mad Money” last night
DQ- raised earnings guidance and plans to build new polysilicon facility
LXRX- announced positive clinical trial results for LX4211
ARMH- Microsoft’s Windows operating system to support ARM’s chips
ARO- decent same store sales data
ROST- decent same store sales data
TJX- raised earnings guidance
HAUP- launched new dual format mobile digital TV receiver which according to the company is a “new way” to watch live TV on an Apple iPad or iPhone
QXM- in deal to be acquired by XING for 1.9 shares of XING plus $.80/share cash
Bad-The following stocks have bad news and/or a weak technical pattern
NFLX- closed near a low
FDO- closed near a low after posting awful earnings
MSPD- warned on earnings
ZUMZ- poor same store sales guidance
MEE- warned on shipments guidance
QDEL- share offering
CGA- closed near a low
SODA- closed near a low
RIMM – “WSJ” said that the company is going to delay releasing its tablet computer until summer
M- poor same-store sales
GPS- poor same-store sales
TGT- poor same-store sales
KSS- poor same-store sales
JCP- poor same-store sales
PCS- poor subscriber results
Earnings:
THURS JAN 6 BEFORE
MON STZ
THURS JAN 6 AFTER
BLUD GPN SHAW
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
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