Thursday, December 4, 2008

THURS. DEC. 4: A Real-Life China Syndrome?

So, when is 8% growth of a country’s economy a bad thing? It is the case in the present time with the place being the nation that aspires to be the world’s next superpower- China. The situation is apparently so dire that China’s top economic policy makers are holding a special meeting next week to plot how to secure growth of at least 8% in 2009. The global financial crisis is harming growth and inhibiting the creation of jobs. Annual GDP growth slowed from 10.1% in the 2nd quarter to 9% this past quarter and is forecast to be 7.3% next quarter year-on-year. The issue here is that an 8% growth rate is heralded as the minimum amount in which the Chinese economy needs to expand in order to absorb the millions of people seeking their piece of the Chinese dream in the job force. The problem if anybody remembers recent Chinese history or is paying attention to current trends in China is that there have already been growing protests by laid-off workers as well as strikes by taxi drivers which is a hint of portending social instability should the Chinese economy not be able to handle the influx of new workers. Thus, not only is bad socially for the nation, but it is bad economically as well. A more unstable China much less one which is not functioning at maximum economic force is a major negative to worldwide growth and the worldwide economy as well. Day traders must pay attention to this matter. Must. Must. Nobody is really talking about China as a major catalyst for what the market will do in the next year, but an argument can be made that the major sell-off in the States earlier in the week was precipitated by that negative report Monday morning. So, one more thing to add to the pile to keep your eyes attuned to because although China won’t affect things intra-day per se, it will be a force in the macro picture in shaping how the overall dynamic of the market acts for some time to come.

Markets in Asia were unchanged to down 1% while European bourses are up 1% to 2% across the board around 7AM ET. Bonds are up strongly and oil is down 1% yet futures are barely lower. All of the parameters surrounding everything indicate the markets here should be down a bit after the last two days of gains in particular, but the action is not being reflected. Thus, look for a little more strength early on, but if there is no initial rally, the averages will likely trend lower throughout the session.

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 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified-

Good- The following stocks have good news and/or a strong technical pattern

PSS- met earnings estimates

FCE/A- strength continued yesterday; looking for more today on an A-B-A2 if it opens down or unch

SLB- closed near a high after warning; would do A-B-A2 thru yesterday’s 48.67 high

WYNN- closed at a high after coverage initiated at a ‘Sell’ at Citicorp

SNPS –good earnings

STT- cutting 6% of workforce, but sees earnings for quarter in the high end of expected guidance

CBST- closed near a high

SNDK –up on takeover rumors; likely a A-B-A2 to downside today with Toshiba denying rumors

BBND- continued short covering rise

VNO, SPG- among the strong REIT’s yesterday

AGN, CELG- on “Mad Money” last night

Bad-The following stocks have bad news and/or a weak technical pattern

ARO- warned on next quarter

JAS- warned on fiscal year 2009

JEF- warned on next quarter

ADBE- warned on next two quarters

HE- share offering completed yesterday at 23 which is where stock closed; looking to short below 23 if it gets there

MRK- warned badly on its 2009 outlook

MOV- warned horribly on its 2009 outlook









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Good Luck Today!

Erik Kolodny