TUES. AUG. 26 THOUGHTS

Often-times during very light volume periods, particularly amidst times of decent price swings for the overall market, price movements can get wildly exaggerated even when there is little news flow. With that in mind, it usually takes some sort of spark to get a move like the one experienced yesterday. If one studies the whole situation a bit more, one will notice some strange nuances. For instance, Fannie Mae and Freddie Mac (FNM/FRE) both closed higher yesterday. Furthermore, big oils like Exxon (XOM) also closed sharply down despite the fact that oil was a bit higher. So, why were selected entities performing exactly the opposite of the way one would think they would do? It is because in volatile times like this with so many people redeeming monies from various funds, many of these mutual and hedge funds have to raise cash in order to satisfy the requests from their clientele. Many fund managers operate under the same mentality of the average investor- they exit winners out of fear of losing profits. Thus, on a day like yesterday when there were heavy redemptions going into a holiday weekend during a vacation period, fund managers selected to do things like cover their short positions in FNM and longs in XOM than take their lumps in long-term holdings which are going against them. It is much easier psychologically to take a profit than a loss. So what does this mean for the day trading world? It makes things harder- and simpler. First, ‘harder’ because things that don’t intrinsically make sense occur. But ‘easier’ because it becomes clear during the day what is occurring; when FNM and FRE could not go down on the day after having their debt cut, they stayed positive all day. So, the advice is to go with the immediate trend; if something does not make a lot of sense, it will tend to keep not making sense in an even more exaggerated manner in terms of the delta of the move.

Overnight, markets throughout the world were weak, down about 0.5% globally. Commodities are weak again as well. For today, look for thin trading and it will likely be choppier than yesterday as there is some good news sprinkled into the mix today.

Reiterating-If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 based on direction of the market unless specified

Good-

STSI- very strong yesterday

ELN, BIIB- positive drug news yesterday; may be follow through but if not, short thru unch

AET- pre-announced positive earnings guidance

APC, COH- big buybacks

TTWO- deal with ERTS seems to be getting closer

CLNE, MDRX – on Cramer’s show last night

Bad-

DRI- abominable warnings; same store sales down for quarter

COCO- bad earnings


TUES AUG 26 BEF

AEO .28/709M .40/778M 1.50/3.19B 1.67/3.46B

BIG .27/1.10B .18/1.04B 1.90/4.72B 2.06/4.77B

BMO 1.18/? 1.25/? 4.52/10.96B 5.15/11.75B

CHS .03/405M .07/411M .17/1.64B .38/1.70B

COCO .09/277M .08/283M .40/1.08B .55/1.22B

DAKT .17/142M .23/156M .81/597M 1.11/695M

SAFM .01/465M .19/504M .87/1.77B 3.51/2.07B

SFD -.04/2.87B .04/2.97B .80/12.69B 1.85/14.01B


TUES AUG 26 AFT

BGP -.29/783M -.57/734M -.22/3.56B .10/3.39B

JCG .32/338M .46/367M 1.71/1.49B 2.00/1.67B


Good luck today.

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