TUES. JUL. 15 THOUGHTS

One of the oldest sayings in the book is “the perception becomes the reality.” Now, we’re not going to turn this into a philosophy lesson (although maybe we should). Yesterday afternoon, the author of this blog- who has a somewhat significant amount of money at Washington Mutual Bank (WM)- decided to take his money out of the bank. Is that bank in trouble? Does anybody really know? But with the stock approaching 3 dollars a share, the growing perception out there is that the bank indeed is in trouble. Ask the people standing in line (and especially the people with non-FDIC protected accounts) at Indymac Banks around the nation (IMB) as to what reality is. In a micro sense, this concept is especially true in day trading. Whether it is Level II marketmakers or a broader concept such as whether WM will fail, we as a day trading community trade increasingly on perception as a sense of paranoia- undeserved or not- pervades the street. There are real actions which occur such as the removal of money from a bank account, but the perception that just such a thing could happen is what helped drive shares of WM among others down yesterday. And as day traders, all we know is what we see; we do not know the liquidity ratios of National City Bank (NCC) or how much money has been withdrawn out of WM, but we can act on what we see in front of us to earn a living. And if the perception is that the financials are in trouble, well all of a sudden, many of them may well be…but again, put rather coldly, it is not our place to worry about such dense yet important concepts to do our job. Rather, we must continue to act on the perceived view of reality- whether it is reality or not because inevitably, it could become reality.

Overnight, it is more of the same. Markets in Asia were hit very hard overnight on more financial worries which spread to Europe which spread to the U.S. Oil is up somewhat significantly, the dollar is down a lot, and metals are up. There are four different ways today will play out. The best is that we open sharply down (like 500 points on the Dow) and begin rallying. The smaller version of this is that we rally from wherever we open. The second is an A-B-A2 in which we open (again use Dow metrics)- down 100, go to down 150 or something, and then buy down 100. The third is an A-B-A2 in which the Dow opens down 75, rallies to down 40, and then short down 75. The fourth is the ever fun A-B-A2-B2-A3 in which the market would yo-yo first before doing one of the aforementioned scenarios. Sounds heady, but it really is not if you think about it.

LEH- really closed near 13 last night…there was a huge downtick on the closing bell. If the market rallies, it is a buy thru unch (12.40).

DNA- good earnings; they missed on current quarter, but raised guidance. In rallying environment, looking for A-B_A2 to upside; if down market, no trade.

STSA- bank; looking to short thru 2.50 if it opens higher

ESLR- announced gigantic contract; likely A-B_A2 of some sort.

SAH- warned…A-B-A2 on downside potentially

CSIQ- share offering; if market rallies, stock will probably uptick after strong day yesterday

JNJ- good earnings A-B-A2 to upside

ETN- bad earnings…A-B-A2 of some sort

STT- VERY strong earnings; A-B-A2 of some sort, but it could stave off a collapse of big bank stocks today

USB- bad earnings- likely an A-B-A2 to downside if market trends lower

KMB- warned a-b-a2

Slew of bank/financial stocks…all of these could be buys if they open down and go thru unch or some A-B-A2 if they open down, rally, and then market sells off:
ZION, STI, DFS, PNC, KIM, AIV, AFG, UB, C, HPT, BEE, WM, WB, CBL, COF, SNV, AIG, LM, WBS, BOH, SHO, MI, SFI, WL, CIT, RF, ACAS, NPBC, WTNY, FMBI, SUSQ

Bernake (sp.) speaking at 10AM; Bush at 10:20AM. Be careful.

Earnings:

TUES JUL 15 BEF

ADTN .30/128M .34/136M 1.24/519M 1.41/559M

ETN 1.95/4.14B 2.05/4.20B 7.85/16.10B 9.01/17.60B

GWW 1.46/1.73B 1.52/1.77B 5.88/6.87B 6.50/7.30B

JNJ 1.12/15.99B 1.10/15.61B 4.45/64.24B 4.67/65.53B

PII .68/404M 1.10/559M 3.41/1.90B 3.87/1.99B

STT 1.35/2.58B 1.18/2.47B 5.15/10.06B 5.48/10.74B

USB .60/3.78B .61/3.84B 2.47/15.31B 2.68/16.28B

TUES JUL 15 AFT

ALTR .27/347M .26/351M 1.07/1.39B 1.26/1.53B

CTAS .56/1.02B .54/1.02B 2.14/3.95B 2.27/4.17B

CSX .90/2.85B .91/2.87B 3.57/11.38B 4.26/12.27B

INTC .25/9.32B .34/10.07B 1.25/39.94B 1.52/42.72B

JBHT .36/925M .41/970M 1.54/3.81B 1.91/4.11B

STX .42/2.88B .58/3.23B 2.62/12.69B 2.51/13.16B

VFC .85/1.67B 2.14/2.28B 5.96/7.90B 6.61/8.56B

Good luck today.