A few weeks ago, just after the riots took place in Tunisia and as there was trouble brewing in Egypt, I wrote a fairly long piece about the simmering tensions in the region. I noted that the importance of taking some time to understand the situation and stressed that it was very plausible that a repeat of the fall of communism from 1989 may be happening in that powder keg of an area. The main reasons are economic and human right-related. Many people live in untold squalor amid autocratic leadership. Based upon history (in most nations but not just the Mideast), it was a situation that could last for many years...but never permanently and what we are seeing is the beginning of whatever major evolutionary change is going to occur whether it be to a democracy or to something much more sinister. The next domino to fall in this process appears to be Libya. Almost as soon as the army seized control in Europe, the crowds began to grow exponentially in the streets of places like Tripoli where the likes of Moammar Gadhafi has been in power for decades. Most notably for trading purposes, Libya is the initial oil exporting nation wrapped up in the political chaos throughout North Africa and the Middle East. Traders are quite concerned that even more chaos in the unstable region may cause a major sustained spike in crude oil prices. Libya is actually the 3rd largest oil producer in Africa. Furthermore, the nation supposedly sits on gigantic reserves of undeveloped oil and gas- believed by many oil experts to be the largest in Africa according to several major publications. Libya has had U.N. sanctions there since the early 1990's after members of Libya's intelligence service were found to be involved with the 1988 bombing of a PanAm flight. The sanctions were lifted in 2004 but most of the fields remain undeveloped and renewed investment in the oil sector commenced shortly thereafter by most of the rest of the world. In any case, Libya is no Egypt. The leader (Gadhafi) has already said he will crack down on the protesters and there are worries that the oil supply could become disrupted thus disenfranchising the already poor populace even more. Furthermore, at this point, there is genuine fear that the Libya's crisis can spread to other major oil exporting nations in the region much less strikes which are already occurring at places such as the Nafoora oil field.. Now, in principle, let's not delude ourselves- Libya is a bit player in OPEC with a nation like Saudi Arabia ready to step in with additional production if need be. But, already, the situation in Bahrain- precariously close to Saudi Arabia- continues to intensify with protests taking place around the clock. So, the fears of this spreading to a nation like a Saudi Arabia are quite palpable. A spike in oil prices would certainly stint whatever nascent economic recovery/stabilization that much of the world has seen these last two years so it is urgently important that every day trader become well aware of what is going on in the area as even a rumor of anything happening there can and will sway the market wildly in the coming days, weeks, and months.
Markets throughout the world were generally lower overnight with Asian markets down 0.3%-0.5% with European bourses down a little more than that with the likes of Frankfurt down 0.7%. Oil is up 1% again on Libyan fears, gold is ahead slightly, the dollar is weaker against the euro, and bonds are flat. Futures are slightly higher. Existing Home Sales (5.23 million units) are due out at 10AM ET. The day today looks to be quieter than yesterday, but there will be tremendous noise in individual stocks underneath the surface. Gains for the broader tape will likely be capped on Libyan fears but with oil and equities higher, there does seem to be a floor so the market appears to be trapped for the session. The focus will likely be on drug stocks in the news (VRTX), big cap tech (HPQ, AAPL), the earnings plays, materials/commodities/oils, and relative strength and weakness plays particularly in the early part of the session.
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
BDCO- closed near a high
GBR- closed near a high
HLF- good earnings
HTZ- decent earnings
CHK- decent earnings
DDS- decent earnings
OCLR- featured on “Mad Money” last night
TOL- decent earnings
DTV- decent earnings
VRTX- positive phase III study of VX-770 cystic fibrosis drug results
HSNI- decent earnings
Bad-The following stocks have bad news and/or a weak technical pattern
DAKT- closed near a low after posting earnings
EXPD- closed near a low after posting earnings
MEE- closed near a low
WLT- closed near a low
CF- closed near a low
POT- closed near a low
MOS- closed near a low
X- closed near a low
NFLX- closed near a low
AAPL- closed near a low
AMZN- closed near a low
SNDK- closed near a low
GS- closed near a low
UAL- closed near a low
FCX- closed near a low
CLF- closed near a low
RIMM- closed near a low
WYNN, LVS- closed near a low
FWLT- closed near a low
FDX- closed near a low
HPQ- terrible earnings
EXEL- poor earnings
LEAP- poor earnings
MHK- poor earnings
TXRH- poor earnings
LOPE- bad earnings
SATC- bad earnings
GRMN- bad earnings
LOW- poor earnings
PWR- poor earnings
TJX- poor earnings
Earnings:
WED FEB 23 BEFORE
AMT BBG CLH
DNR DTV EV
FLR GRMN LOW
PWR SGY SKS
TJX TOL VNO
WED FEB 23 AFTER
AVGO AXTI CLR
CXO FARO FIRE
FLS GNK HLX
IDCC IPI LTD
MELI MGA NTES
NUVA ONXX PCLN
QCOR RIG RRC
WLL XCO
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
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