THURS. SEP. 4: Are declining oil prices now bad for stocks?

Remember how when you were a kid and wanted to eat as much candy as Mom and Dad allowed you to have on Halloween? Well, the good candy of course anyway! And the more you ate, the more you wanted until you hit a point where the next piece kinda-sorta made you sick? We are at that point now in the spread between the delta of oil versus stocks. Oil’s steep decline recently has been dramatically exacerbated by fund selling (as predicted in this space recently) and in turn, this is weighing on the stock market. Stocks of coal companies like Arch Coal (ACI) have been in near freefall for a few days now. Naturally, commentators are rushing for an explanation for all of this activity with the most notable marketspeak being that ‘demand for oil has fallen worldwide.’ Really? Is it that much different than it was, say, a week ago? The point for day traders is that while there is not necessarily a direct correlation between the direction of oil and stocks, it is fair to say that there is indeed next to no correlation right now. So, certainly over the next few days, one cannot say “Oil is down today; why is the stock market down?” Or vice versa. Instead, focus on selected beaten down commodities sectors for day trades as the selling and eventual short covering rallies will be particularly fierce.

Overnight, markets in Asia were generally lower; this trend followed through to Europe as the German DAX in particular is weak. Commodity prices are bouncing. With the oil inventory report due out today, there could be a vacuum to the upside; there is already a bit and any whiff of good news will cause massive short covering. Stocks will likely repeat their performance yesterday; choppy trading all around with no very clear momentum.

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-

NAV- great earnings; likely A-B-A2 to upside

BBT- on “Mad Money” last night.

CBAK- good earnings; looking for A-B-A2 to upside in particular

PSS- good earnings. Short thru unch, but much more likely A-B-A2 to upside

GES- decent earnings; stock not reacting. Short thru unch, but if it holds unch, looking to buy at open

STP- due for bounce after strong earnings a few days ago. If oil rallies, STP likely leads solars higher.

WMT- solid same-stores sales data. Looking to buy A-B-A2 pattern in particular

Bad-

LEH- several takeover rumors squashed; should be down today. Buy thru unch or A-B-A2 to downside.

GAP- closed weak yesterday; if it opens higher, looking to short thru unch.

CIEN- abominable earnings- looking for A-B-A2 to downside off of open

JOYG/BUCY- both sharply lower yesterday. If they receive a few upgrades and are holding around 10:30AM in particular and oil report strong, buy them both. Ditto for others in genre like ACI, BTU
TOL- beat on quarter, but will not discuss guidance. Looking to buy thru unch or A-B-A2 in weakness off of open

TEX- warned very badly; likely A-B-A2 off of open

TPP- share offering at 29. Should open below 29. Looking to buy above 29 as offering should keep it down thus if it does not, stock will likely have some short covering.

THURS SEP 4 BEF

CIEN .37/254M .39/265M 1.63/988M 1.77/1.15B

JTX -.69/4.47M -.75/4.10M 1.52/300M 1.72/319M

TOL -.19/764M -.14/682M -1.55/3.07B .56/2.20B

UTIW .27/1.24B .36/1.35B 1.11/5.08B 1.33/5.63B

THURS SEP 4 AFT

ADCT .26/389M .25/381M 1.17/1.52B 1.32/1.60B

COO .65/285M .70/292M 2.29/1.09B 2.70/1.20B

TTWO .54/381M .19/350M 1.83/1.50B 1.58/1.48B

ZQK .21/544M .29/616M .86/2.25B .93/2.38B


Good luck today.

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