TUES. FEB. 1- The Power Of The Markets

I used to love building massive sand moats on my beloved Tybee Beach in Savannah, GA. I'd spend upwards of three hours just sitting in the sand making huge castles and complicated pathways. Inevitably, I'd make a new friend or five as other kids would join me. When the tide would come in, there'd be a glorious couple of minutes whereby water would fill the pathways with the structure being this perfectly engineered mechanism. And a few minutes later of course the moat would be gone and buried under the inevitable crush of water coming in to shore. I thought of that relatively blissful analogy late last week when those riots began occurring in Egypt on two scores trading-wise. First, it is much easier to destroy than create. What had taken indexes such as the NASDAQ several weeks to build in terms of performance was almost wiped out in a couple of hours. Measures like the VIX jumped over 20% on Friday with the action showing once again that prices can move to the downside much faster than to the upside. Second, this is always true of P&L's of most traders as well. Many people tend to not accept what is happening and/or fight it. A month or more of hard earned profits can be wiped out in an hour or less. This leads to rash decisions which inevitably cause more pain. I learned this the very hard way most notably in 1996. While still in college, I had gradually built almost nothing into $110,000 over the course of over two years. I bought some shares of Symantec (SYMC) on a Thursday afternoon in early January. The stock fell a bit so I bought a little more. By Friday afternoon, I had my biggest two-day loss in my history. Monday was a little worse. Then the stock got halted as they warned on their earnings. By Tuesday morning, my $110,000 was under $20,000. It took several months to get over that (and in many ways, I am still not over it). But it did teach me the power of the markets as well as the lesson that if I made poor decisions in doing things like building positions, averaging down, not being prepared in understanding things like earnings flow, not paying attention to news flow, and so forth, well I wouldn't be writing this piece today 15 years later still in the business.

Markets were little changed in Asia overnight, but broadly higher to the tune of about 0.8% to 1.1% throughout Europe. Oil is finally off a little, but gold is up ¾% wit hthe dollar weaker across the board. The bounceback from yesterday continues this morning with futures up a bit. The strength is here amid decent earnings flow and a growing belief that the Suez Canal is not under threat as it’s in nobody’s interest for it to shut down. There does seem to be a ceiling (and a floor) on stock prices so look for a little backing and filling with the tone decent but the focus moreso in individual names than the broader tape. The things to watch include the small cap biotechs (OREX), the myriad of earnings plays, the casinos on the Macau data out overnight, and relative weakness trades particularly if things retrace a bit not long after the opening bell.

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

PLL- closed near a high after being upgraded at Credit Suisse

TNB- closed near a high after posting earnings

ASIA- closed near a high after posting earnings

XOM- closed near a high after posting earnings
SODA- closed near a high

APA- closed near a high

FSLR- closed near a high

POT- closed near a high

CLDA- closed near a high

GS- closed near a high

IBM- closed near a high

SSN- closed near a high

NBL- closed near a high

NFX- closed near a high

CPE- closed near a high

NPSP- closed near a high after issuing positive Gattex results

CHK- closed near a high after announced a deal to sell some acreage to Cnook; CEO featured on “Mad Money” last night

DEPO- closed near a high after the FDA OK’ed Gralise tablets and got a milestone payment from ABT

BIDU- great earnings

NVLS- good earnings

IRF- decent earnings

MTW- decent earnings

ICUI- good earnings

ONXX- FDA granted fast-track status from for blood-cancer treatment

SIMO- good earnings

ADM- decent earnings

ARMH- decent earnings

BIIB- decent earnings

CMI- decent earnings

COV- decent earnings

LXK- good earnings

TUP- decent earnings

MTW- decent earnings

AMSC- decent earnings

PCX- decent earnings

UPS- decent earnings

AXE- decent earnings

CVLT- decent earnings

PRGO- decent earnings

ALV- decent earnings

ARM- decent earnings


Bad-The following stocks have bad news and/or a weak technical pattern

APC- poor earnings

BCR- poor earnings

CAVM- poor earnings

HOLX- poor earnings

PRXL- poor earnings

HOV- share offering

CHKE- closed near a low after the chairman of the board and its dividend was cut

CCME- closed near a low

TGA- closed near a low

OREX- negative complete response letter for the company’s Contrave

ENR- poor earnings

VTR- share offering

EMN- poor earnings

PCL- poor earnings

BP- poor earnings

PCAR- poor earnings

PFE- poor earnings

Earnings:

TUES FEB 1 BEFORE

ADM ALV AMG

AMSC ARM ARMH

AXE BIIB BP

CMI COCO COV

CVLT DANG EMR

ENR EXP HNT

KCI LEA LSTR

LXK MHP MPEL

PCAR PCX PFE

PRGO RTI TUP

UPS

TUES FEB 1 AFTER

ADS AFL APKT

BRCM BSX CCK

CHRW ERTS FORM

JDAS JKHY JLL

MEE MWA NLC

TIE TRMB UIS

WFR WU


Epiphany Trading, LLC
www.epiphanytrading.com

Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President