FRI. SEP. 12- Look at LEH Now...

Perspective. Sometimes, we just have to keep it all in perspective. The demise of Lehman (LEH) is obviously a tremendous story, but not as much as it used to be. As of the close of trading yesterday, Charles Schwab (SCHW) had a market capitalization of just over $28 billion. The market capitalization of LEH is now under $3 billion. This means that if someone comes in to buy LEH at twice its current price (i.e. buyout at 8), it’d still be under 25% the price that SCHW is worth. Thus, LEH has been one of the top stories of the year – especially in this day trader column- but the time is almost here to stop discussing LEH. No matter what happens, the situation is entering the final chapter and it is time to focus on the future. Many of the big capitalization financials rallied extremely hard yesterday as the dichotomy being good and bad entities begins to forcefully assert itself. While there will be hiccups over the coming days and weeks, we as day traders need to envision a day in the coming weeks when LEH will be discussed as part of history rather than having an impact on the markets- and that time may have started yesterday. In the interim, if you want to focus upon the financials for day trading, do not get caught up in rumors and scalping of LEH as it is a difficult and hard game; trade only the concrete and realize that the market continues to change its face on a daily basis.

Overnight, markets in Asia were mixed with Europe up a bit. State-side, look for very choppy and volatile trading today which will likely be directionless albeit with a downside bias as the day progresses if financials give back some of yesterday’s fierce short covering rally.

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-

RJET- closed very strong at a multi-week high. Looking to buy it if it opens lower.

WFC/JPM- strong yesterday…seeking follow-through if mkt strong

JOYG- announced massive buyback yesterday morning; stock should continue to rally…if it goes thru unch, it is a short

POT- announced massive buy-back; likely A-B-A2

Bad-

LEH- continued rumors will envelop trading today…no definitive trades here except that if it is trading higher in the pre-open, it is a short the first time it goes thru unch. If it opens down post-open and begins to rally, it is likely a buy thru unch the first time it goes through.

AIG- bounced huge yesterday; there will be rumors all over the place here as well

MER- closed off the low, but rumors will begin taking this one too…will likely follow LEH’s lead

SRZ- incredibly weak the last few days after poor earnings; may see follow-through and if it stagnates near yesterday’s low, looking to short thru that low.

No earnings of importance today.

Good luck today.

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