I want to follow up on the urgently important pieces of the last two days (Tuesday’s re a changing market and yesterday’s all about Libya). If you’ve failed to adjust your trading style this week much less taken the time to understand what is going on in the Middle East, you are very likely not having a good trading week. But there’s much more to it over and above what has already been described. An integral piece of the puzzle likes in Bahrain. In images eerily similar to those from Cairo, protesters have swarmed Manama’s Pearl Square in the heart of the island. Saudi Arabia and Bahrain have historically had fairly close ties with the king of Bahrain traveling to Saudi Arabia in the face of the protests with the Saudis ready to announce a massive aid package for the citizenry of Bahrain. All of that seemingly positively buzz on the surface is masking the true story. Namely, serious discontent in Bahrain (particularly in light of the Libyan uprisings) may well continue to play a key part in the fate of the energy markets because of the possibility of sucking in other nations. As it turns out, the Sunni minority has been ruling the nation for quite some time and is facing the Shiite majority. Sunni and Shia Islam, for those who do not know, are the two major denominations of Islam. The major difference in the split of the two sects centers around what occurred when the Islamic prophet Muhammad died in 632 regarding a dispute over Muhammad’s successor. In any case, Bahrain is also the current home of the U.S. Navy’s 5th fleet. If a new government was not as friendly to the presence of the United States, the 5th fleet would be homeless and raise viable concerns about the U.S. being able to patrol the Persian Gulf. Furthermore, Bahrain sits adjacent to Saudi Arabia and there are major worries about the spillover effect of the unrest to Saudi Arabia. So, while Libya has grabbed a lot of the recent headlines, the demonstrations in Bahrain actually started first…and will likely be an even more important variable regarding the stability of oil prices, the stock market, and the world economy.
Markets overnight were down throughout the world with Tokyo and Hong Kong both down over 1% with most of the bourses down a bit more moderately in Europe with London as an example down 0.3%. The dollar continues weak with the 82 yen level having given way. Gold is down slightly with bonds up slightly. Oil is soaring again but well off of its high (having touched $103/barrel overnight). Futures are down but also significantly off of their lows. Rumors are rampant from what is going on in Saudi Arabia to an upcoming press conference to be given by Libya’s leadership. Jobless claims were slightly better than expected with durable orders in-line. The FHFA Housing Index is due out at 10AM along with new home sales data (310K). Crude Inventories are due out at 11AM; the data will likely be a bit more important than normal today. For today, look for a very choppy session which will be highly oil-dependent. The tone is better than in recent days and it seems like there is a floor- and a ceiling- to equity prices in the immediate-term. The focus will be on the tremendous earnings flow, the fertilizers, the oils, the big cap techs on the myriad of news there, retailers on the TGT and KSS earnings, and small cap energies which have skyrocketed the last few days.
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
FARO- good earnings
MELI- decent earnings
FLS- decent earnings
PCLN- good earnings
NTES- good earnings
PPO- great earnings
KAI- good earnings
WBMD- good earnings
ROYL- closed near a high after getting regulatory approval for a second Goddard well
BDCO- closed near a high
PDO- closed near a high
COG- closed near a high after posting earnings
CNX- closed near a high
CHK- closed near a high after posting earnings
SA- closed near a high
HES- closed near a high
DBLE- closed near a high
VRTX- closed near a high after issuing positive phase III cystic fibrosis results
CF- closed near a high
IPI- good earnings
IMAX- decent earnings
NEM- decent earnings
Bad-The following stocks have bad news and/or a weak technical pattern
NUVA- poor earnings
QCOR- poor earnings
WLL- poor earnings
AXTI- poor earnings
ILMN- closed near a low
ADSK- closed near a low
DLTR- closed near a low after posting earnings
ARTW- closed near a low after posting earnings
VICR- closed near a low after posting earnings
SLXP- company indicated FDA may deem Xifaxan sNDA not ready for approval
ETFC- poor daily average revenue trade data
SAFM- poor earnings
MYL- poor earnings
GT- poor earnings
DISH- poor earnings
Earnings:
THURS FEB 24 BEFORE
CMS CSE DISH
DTG EP ESV
FIG FTO FWLT
GM GTI HERO
HOC IPXL IRM
JOE KBR KSS
MGLN MYL NEM
NIHD OCR PCS
PDCO PXP SAFM
SATS SHLD SWY
TGT TK
THURS FEB 24 AFTER
AGO AIG AMAT
BEXP CRM CROX
CYH DECK DRC
DWA FSLR GERN
GG GPS HANS
HGSI INT MRX
NTRI NVTL OVTI
SBAC SD SM
SMSI SWN TIE
TRLG
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
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