FRI. JUN. 13 THOUGHTS

“All In The Family.” The Bicentennial. Those are two good things that came out of the 1970’s in the United States. However, ‘stagflation’ was also rampant throughout most of the decade. Stagflation loosely defined is a period of slow economic growth, rising unemployment, and rampant inflation. While a discourse into whether this is the direction the economy is headed in is perhaps warranted, it is worth noting for us day traders some very strange things in recent weeks. First, food prices are rising even faster than oil prices. Speaking of oil, the second point- the U.S. dollar is strengthening along with oil- the opposite of what has occurred throughout much of the run-up in oil prices. Third, bond yields are soaring upward in recent weeks while stock prices have fallen. Now, call me crazy, but rising interest rates, rising inflation, an unemployment rate which jumped last month, and falling stock prices portend trouble. For us day traders, this is all important for one reason: nobody really knows what number will be of importance of any given day nor will anybody know what said numbers mean. Some days, rising oil prices is implied as good because it shows ‘increased world demand.’ Some days, rising interest rates are good because it implies investor selling bonds and buying stocks. So, this harks back to the theme yesterday- keep in mind the big picture here- namely, the combination discussed here is not a good one. However, on any given day, random numbers will be cited as justification for the movement of stock prices. For now, the only two numbers that matter – in order- are the stock price of Lehman (LEH) and the price of oil; do not ignore the minutia nor drown it out. But realize that for all intents and purposes, LEH and crude oil are all that matter- and realize that because of the aforementioned minutia, any given number could become all-important at any given time in the coming weeks.

Overnight, the Asian markets were mixed with Tokyo up, Hong Kong down, and China down yet again continuing an astounding and largely unnoticed 50% plus fall from its height. Oil prices are down in the early-going with the dollar up slightly. It will likely be a relatively slow day today with sunny conditions and 80 degrees in the tri-state area, particularly with the market slightly higher and closing in the middle of its range yesterday. That said, there will probably be a continued small bounce with a somewhat firm tone for much of the day barring unforeseen news.

YHOO/GOOG- officially announced a partnership last night; news should be factored into YHOO…it is a buy thru unchanged particularly if it barely opens lower.

KEY- issuing 85 million shares at 11.75. The stock should stay below 11.75. if it gets to 11.76 (one penny up), it is a buy as it indicates the offering is factored in.

RJET- looks terrible on a chart; approaching multi-year lows and may be short at/just below round number of 10.

CTL- down hard yesterday; likely a short thru low of yesterday around 32.

RRC/REXX/CSX- on Cramer’s show last night.

BUD- announced that they are trying to do a deal with someone else rather than being bought out. Stock should be down; if it opens near unchanged and ticks higher, it is likely a buy.

STLD/X- STLD pre-announced positive earnings; likely an A-B-A2 off of the open as a buy. Conversely, it is a short thru unch.
PWRD- positive pre-announcement. An A-B-A2 bullish set-up.

GNK/EXM/DRYS/DSX/other dry bulk shippers- have been slammed last few days. Looking here at A-B-A2 also; if they open higher (as they should), dip and hold unchanged, and get back to the opening level, they are all buys.

Good luck today and have a good weekend.