WED. JUL. 16 THOUGHTS

An extremely important tenet of trading is to ‘listen to the message of the markets.’ Of course, nobody really truly can say with 100% certainty what that message is. But there are often some major crosscurrents which provide some color. Yesterday, among other things, the Federal government decided to ban naked short selling in Fannie Mae (FNM) and Freddie Mac (FRE). Without going into detail about the historic ramifications of this development, suffice to say, one would think shares of those two entities would close higher even in the immediate-term. Instead, they were the two biggest percentage losers on the NYSE. Furthermore, the price of oil yesterday had one of its biggest one-day declines of all time. One would think that the S&P 500 would close higher. Instead, the S&P 500 closed down over 1% on a new multi-year low. The message of the market from these two tenets is this: it is highly likely that the bottom is not in yet. These two developments should have been viewed as a positive and instead after a nice rally, the broader market still finished down heavily again. For day trading purposes, the Dow Jones Industrial Average (DIA) for instance was a short thru unchanged in the late afternoon when that particular average failed to hold its gains. Now, for all I/we know, yesterday was the bottom proving everything typed here invalid. However, one has to wait for the market to totally ignore negative news and focus on the positive in all likelihood. For instance, if a major bank were to fail and the market finished positive as people wondered why the market did not go down (with the answer being that most if not all the bad news is out), that’d be a sign. If a Citicorp or a Merrill Lynch (MER) reported huge write-offs and after opening down, they finished higher (presumably because write-offs were finished), that’d be a sign. But, if the market does not react to positive news, the message here is still to be very careful as complete fright/panic has not set in quite yet although we are subject to massive short covering rallies here almost at random. And please please please do not take this as a long-term forecast; use these parables for day trading only, specifically the example of the Dow plunging through unchanged late in the day when the market failed to hold in reaction to what should have been perceived as good news.

Overnight, markets in Asia were slightly higher while Europe is getting hit again, down 1 to 1 ½% across the board. Oil is down another couple of dollars a barrel. State-side, the futures are weak again. The forecast for today is choppy. It is probably going to be a difficult opening to trade as stocks closed in the middle of a wide range yesterday so be a little extra cautious to start certainly. It is notable that things like FNM and FRE and WFC are up this morning so they may provide a bit of a cushion to overall prices. CPI data is the negative; stocks are mixed, but seem poised for some short covering with financials strong. Today though...today could be a pretty good A-B-A2 to the upsdie for the market. If we open higher, there will likely be some selling, but there's an underlying strength there not found recently.

INTC- came with decent earnings and raised guidance; not really a trade per se as an indicator of where the market will likely go. NASDAQ relatively strong yesterday so the direction of INTC will likely show the state of the market. Not necessarily eve na short thru unch…just watching it.

CBI- warned badly. Likely an A-B-A2 of some sort- probably to upside as it traded to 27 last night and bounced.

CSX- good earnings; if market strong, likely an A-B-A2 to upside

VFC- bad earnings; stock beaten down…ideally looking for A-B-A2 to upside if market trends higher

STX- bad earnings; wonder if stock can get over 16…A-B-A2 of some sort

JAVA- stock traded a lot higher than its current level lat this writing of around 9.30. Could be A-b_a2 to upside in market strength.

GNW- closed on low; if it opens higher, looking t oshort thru new low

ACE- same as GNW

ABT- good earnings; looking A-B-A2 of some sort

WFC- fantastic earnings. Likely a short if market weak, but will be more likely a complicated A-B-A2 of some sort.

CLF,ANR- CLF buying out ANR for 0.95 shares of CLP plus 22.23 in cash. CLF likely a buy thru unch if it is close; if not, could be a very good A-B-A2 to upside as on paper this is a good deal for CLF

STJ- great earnings. Looking for A-B-A2 of some sort.

FRE, FNM,LEH, WB- all higher along with other financials…don’t see easy trades, but notable for their strength as one wouldn’t think the market would break if these were up yet if it does, these all become major shorts thru unch.

Earnings:
WED JUL 16 BEF

ABT .79/7.21B .79/7.21B 3.23/29.15B 3.62/31.55B

AMB 1.06/187M 1.02/187M 3.95/736M 4.17/777M

ASML .38/1.25B .37/1.20B 1.76/5.30B 2.13/6.58B

FMBI .48/91M .52/94M 2.00/372M 2.20/392M

GCI 1.02/1.74B .90/1.70B 3.88/6.95B 3.56/6.73B

HST .55/1.41B .35/1.22B 1.90/5.48B 1.94/5.62B

MI -1.39/624M .26/634M -.38/2.54B 1.58/2.67B

NTRS 1.06/1.01B 1.01/995M 4.10/4.04B 4.52/4.36B

PJC -.11/92M .23/101M .43/402M 1.94/465M

STJ .55/1.06B .53/1.04B 2.20/4.22B 2.46/4.63B

WFC .51/10.66B .52/10.81B 2.16/42.91B 2.44/46.24B

WED JUL 16 AFT

ADS 1.00/518M 1.15/538M 4.31/2.14B 4.97/2.37B

AF .36/111M .41/120M 1.53/460M 1.92/529M

CAVM .09/21M .12/24M .45/90M .77/132M

CCK .55/2.12B .66/2.29B 1.61/8.12B 1.93/8.49B

EBAY .41/2.16B .41/2.18B 1.74/9.00B 1.96/10.20B

LSTR .56/674M .59/682M 2.18/2.65B 2.51/2.87B

PLCM .36/265M .39/273M 1.56/1.08B 1.83/1.22B

XLNX .35/482M .36/483M 1.50/1.97B 1.71/2.14B
YUM .42/2.55B .56/2.76B 1.89/11.18B 2.13/11.48B

Good luck today.