FRI. AUG. 22 THOUGHTS

A few weeks back, there was a piece written in this space about the ‘tone’ of the market. Yesterday was a day to revisit that theme. With oil having its biggest one day gain in several weeks and a searing focus by market participants on Fannie Mae (FNM) and Freddie Mac (FRE), one would have expected the market to be significantly lower on the day. Instead, after an initial sell-off, the market began coming back with the major averages closing mixed. It is not for anyone in this space to prognosticate longer-term moves as that is not the focus of the trading done here, but it is worth noting for one reason for day trading purposes: do not get caught up with what should be, go with what is. And yes, that aforementioned sentence is written correctly. Even if you are on ‘death watch’ for Fannie and Freddie, it does not mean they cannot rally here and there. Even if you think oil prices have topped, it does not mean that oil cannot rally here and there. So, again, particularly as we enter the last week in August, please be weary of this and be extra careful trading due to a relative dearth of news these next few days.

On a personal note, we all want to wish our summer intern, Robert Erdogan, the absolute best. He has been a phenomenal help this summer and we will all miss him. Good luck during your senior year!

Overnight, markets in Asia were down slightly, but Europe was higher. The markets state-side are strong amidst rumors of a LEH buyout which is leading to some short covering in the financials. This strength will likely hold today in quiet trading as people jet out early ahead of the weekend.


Reiterating-New code for the next few days if the whole story is not there due to an expansive number of ideas-
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-

LEH- rumors of buyout by Korean Bank. Best trade is early before the rest of the world see the news; other than that, be careful.

FNM/FRE- both bouncing a little; short thru unch if they cannot hold.

ALO- being bought out for 33 a share in cash. As this is being typed, the stock is just above 33…if bids hold, it is the trade of the day particularly pre-open. The stock should be trading just below 33; clearly, somebody thinks there is something more to come for the company.

CSUN- good earnings

GPS- good earnings

BCSI- good earnings

FL- good earnings

STP- has been strong on earnings…could be A-B-A2 to upside if tone good yet if oil sells off, it is likely a short thru unch.

Bad-

DRYS- bad earnings; watch DSX, GNK, EXM as sympathy plays

VRGY- bad earnings

LVS- downgraded and down

ZUMZ- bad earnings

FRI AUG 22 BEF

ANN .45/624M .67/609M 1.84/2.45B 2.10/2.54B
CSUN .03/95M .06/109M .16/410M .60/594M

Good luck today.

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