There's an old saw on Wall Street which goes something like this in the annals of folklore: "as January goes, so goes the year." I've written about this in the past thus I want to focus on an area which gets precious little discussion. Namely, it is interesting that in times of extreme sentiment, market movements can become more exacerbated and particularly volatile in January and into the balance of the quarter. Two recent examples come in mind. In early 2000, sentiment was almost universally bullish. And all the markets did was soar through mid-March. In early 2009, sentiment was almost universally bearish and all the markets did was plunge through mid-March. Here it is early in '11 and most sentiment measures are at high bullish readings. Am I saying we'll top out in March? No. But what I am saying is that movement can and likely become rapid, choppy, an exaggerated as has already been the case for what has already been two fantastic trading days in 2011 early and often at times such as now if for no other reason than many people are on the same side of the fence. As we prepare for another year of trading, look forward to what will likely be a lot of fireworks early this year- and good luck to us all.
Markets were down throughout the world overnight with Tokyo down 0.2%, London off 0.6%, and Frankfurt 1.3%. There was some negative news out of Portugal and a poor view of the Fed minutes out of Europe. The MBA Mortgage Purchase Index was out early this morning, but the biggie was the ADP Employment report which came out at almost 300,000 jobs well ahead of a 100,000 estimate. That lifted the S&P several handles and the Dow by about 50 points off of its lows. ISM Services (55.7) is due out at 10AM and Crude Inventories at 10:30AM. Oil is still down 1%, gold fractionally, bonds have sold off significantly (10 year yield over 3.40%), and the dollar has rallied a full yen and euro. The ADP number is good but it’s notable that the markets couldn’t get positive on it. Look for a very choppy session with the focus likely to be on the fertilizers, the Chinese plays with news (XING, YOKU to name two), and any relative strength play for potential short covering if the markets hold the open.
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
MOS- good earnings; AGU, POT, MON may move with it
XOMA- closed near a high after announcing a deal to jointly develop one of its products (XOMA 052)
PMC- closed near a high in building upon Monday’s gains when PMC announced it’d acquire Lone Star Pharmacy
YOKU- announced it’d partnered with Warner Bros. on transactional on-demand streaming for the movie “Inception”
WYNN, LVS- closed near their highs after KeyBanc upgraded WYNN
WLT- closed near a high
MMI, MSI- closed near their highs on the debut of their Motorola split
AEN- closed near a high
GCFB- closed near a high
FTNT- closed near a high
IDCC- closed near a high
HES- featured on “Mad Money” last night
XING- won bid and acquired a significant minority stake (about 35%) of a large copper-molybdenum mining company
Bad-The following stocks have bad news and/or a weak technical pattern
MTSN- poor earnings; NVLS may move with it
EDR- share offering
HOMB- closed near a low after issuing poor 4th quarter earnings guidance
DAR- closed near a low
LULU- closed near a low
RLD- closed near a low
FDO- terrible earnings
TKLC- warned on guidance and CEO stepped down
Earnings:
WED JAN 5 BEFORE
FDO
WED JAN 5 AFTER
RT
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
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