Jeff T. - Freshman Equities Trader - Weekly Desk Notes

Futures Update and Global Market Recap 

• July 21, 2005- first allowance of Yuan to rise
• Re-pegged to dollar in 2008
• Implications:
• China has faith in its own economy and global economy
• Improving relationships with Obama administration
• Our nation’s biggest importer => products are more expensive
• Chinese labor will become more expensive in part of production process
• Trade balance is hugely negative- higher prices from imports will far outweigh our exports to China
• Traders view China’s news as a positive, views market as cheap, and are looking for excuse to buy when in reality the news is mixed
• Market indicators are on their lows since back in April:
• First less than 10 handle range on Friday
• Avg 5 Day Range is below 14
• Markets on monthly highs:
• Crude oil
• Gold, still making all time highs
• Europe, up 1.5%
• Asia
• Dollar rallying vs. Yen

- FBR says that if MTB was to be taken out they expect value would exceed $120 per share. 

Upgrades/Downgrades 
- More upgrades than downgrades today. 

- PANL: OLED technology that allows the pixels to be flexible. 
- QNST: Frank Quattrone IPO. 
Notes 
- Key in this business is to generate uncorrelated alpha. 
- On big gap days Shine continues to look for relative strength and relative weakness. 
- NAV is a 9/10 on Mosks rankings. 
- GME + BBY 
o Strong names but being liquidated. 
o JF is looking for Revs to start up ticking and EPS numbers to beat handedly next earnings cycle.
- BA strong look to add. 
- JPM = 40. 
- When the market opens up big and pulls in at 10:30 look to run aggressive TWAP’S. 
- Never look at one names PNL when managing an entire portfolio. 
- Look for good opportunities intra-day and generate alpha. 
- Markets don’t go down 20 handles on 2 mln contracts. 
- The day they captured Saddam Hussein the market gapped open 50 handles and ended up closing the day red. 
6/22/2010
Macro Thoughts
• S&P futures down 2.5 handles
• Retraced 1/3 of the whole move from yesterday
• Yesterday was an outside reversal day, which is typically a trend reversal indicator
• Why we don’t necessarily believe yesterday’s outside reversal day is an indicator of a trend reversal:
• We haven’t had a strong trend prior to yesterday
• VWAP curve from yesterday’s is U-shaped where as on May 13 (the last outside reversal day)- more than half of the volume came after 2pm
• MOCs were better to buy yesterday
• This morning we are only 2 handles from fair value whereas on May 14 we had gapped down off the open
• Almost 7% off our lows from late May
• Crude is down about a dollar due to weakness in Euro
• Gold is down 5.50, following equity markets
• Existing Home Sales number today: risk to reward is favorable as a good result will cause markets to rally hard whereas a weak result will only mildly sell off the market by a few handles
• Tomorrow is a Fed day
• Yesterday we saw a bearish engulfing pattern in the daily charts for the S&P cash and on Friday we saw a spinning top
• SNDK: Nice upward pattern during a period of volatility although yesterday we saw a bearish engulfing pattern
• BBY: May put on a TWAP today on this name to get out of our position
• PHM: sitting on triple bottom

Upgrades/Downgrades

- MDRX and ECLP is merging. 
o Hospitals are subsidizing doctors costs for electronic medical records. 
- Dean likes to run his book 25% - 50% long. 
o Usually has an average beta of 1.2. 
- 2007
o Credit Markets locked up. 
o Money became difficult to get. 
- Unless it’s a supreme court decision 
6/23/2010
Futures Update and Global Market Recap
• S&P futures up 3.5 handles from fair value
• Quiet overnight session
• Today 10a: New Home Sales; predicted to be huge drop off due to expiration of tax credit
• FOMC Rate Decision at 2:15p: will definitely be 0-0.25%; so the question is, will “extended period” language be left in
• March 2011 is expected to be first tightening by Fed
• Economy may be more fragile than it was 8 weeks ago, but does not mean recovery not in tact
• Removal of “extended period” language will rally the markets
• Europe and crude oil down small this morning
• Gold up, near all time highs
• Currently unhedged in our net long portfolio
• Will not short S&P futures today before FOMC rate decision announced

Technical Review
• Yesterday was not a damaging day, but a disappointing one
• AAPL held in well yesterday
• Steel, housing, financial sectors continue to be rough
• If unable to penetrate through 1220/1230, we are just in a cyclical trend in a secular bear market
• Don’t believe Fed rate decision will cause any major sell off
• Will be in short the rally mode

- Project on when and why futures symbols change. 
- Analysts are usually late to the party but right. 

Upgrades/Downgrades

- ADBE: People are very exciting about ADBE’s new project release. 
- GAIA: No real update from the company. 
o #1 seller of fitness DVD’s. 
o RBK will add 10 – 15 mln in sales
- Food Network: SNI owns 66%
- RSOL: Solarize your house on your own. 
- $1 in $7 of the pension funds in Europe are in BP. 
- 3 Key Things to Look At 
o Management. 
$FXI - China's stocks declined the first time in three days on conncern the govt is going to extend its tightening measures to commodities
Shine 
- Find ten stocks with a trade in each at a level every day to make a trade. 
- SPYs expire at the end of the month. 
Trading 
- Klein believes AAPL is now more important
- Small Cap – Up to 800mln. 
6/24/2010

Futures Update and Global Market Recap
• Not seeing high interest in selling despite feeling of dragging economy because volumes are light each time we sell off
• Crude oil down 0.60 on top of 1.50 it was down yesterday
• 10-yr yield on 52-week low: sign that economy is sick
• Month of poor economic number releases
• Today:
• Durable Goods (items used over 1 year)- 3rdtier
• Jobless claims- very important and expected to come in at 463K
• Fed came out yesterday: they believe economy is softening
• Fed event sold off the market
• Fed has no bullets left and just has to wait in hopes for markets to move higher- little they can do
• Bullish view on poor jobless claims: explained away by temporary census workers
• Bullish view on poor housing sales: explained away by tax credit expiration
• Good earnings season will enable markets to rally
• Earnings season defined as significant majority of companies reporting subsequent to end of quarter
• Pre-announcements have been very quiet
• Trading in a tight range due to lack of clarity in markets
• Alcoa (AA) is first major earnings report- on July 12 (night)
Technical Review
• Liquidity sale
• Technician’s view: when you start to come to technically significant levels, they’re coming down (or up) to those levels to test them
• We could test 1040 again- does not necessarily suggest bearishness according to above view
• Payrolls number- why stay long and bullish when payrolls number will probably disappoint?

Upgrades/Downgrades

Notes 
- Steel is high fixed costs business so when prices drop margins tighten up quickly. 
- RIMM : Reports 1.38 vs. 1.34: revs 4.24 bln vs. 4.35 bln. And miss on unit sales. They also announced a stock repurchase program which drove the stock up after hours 58.59 – 60.63. The earnings missed and this was a great chance to short the stock, or sell your position. 
o The release gave you about 2 minutes to make up your mind and put on a trade RIMM missed and the opportunity to short the stock was there when guys drove the stock up because of the share repurchase. 
o We saw a similar opportunity to by IMAX when they killed it after a solid beat. 
- Keep track of the earnings and get a feel for how the market will react to the report.

6/25/10
Futures Update and Global Market Recap
• S&P futures up near highs
• Europe down small- in catch up as we sold off yesterday
• RIMM and ORCL reported last night- ORCL reported solid earnings while RIMM missed (due to competition)
• Companies are not saying anything about negative impacts due to European crisis
• Further confirmation that stocks are still cheap right now
• 8:30a, final GDP number- largely ignored
• Revised UMich Sentiment: largely ignored
• Largest item on agenda: Russell reconstitution, which is usually market neutral (Russell 2000, small cap, and 1000, large cap), occurs on last Friday in June at 4p
• Names that are going to be added
• R2 to R1: promoted names, R1 to R2: demoted names
• R1 to R1, R2 to R2: rebalancing
• Reconstitution should increase liquidity flow
• Flows have often gone the wrong way for individual names because of the tremendous amt of speculative dollars chasing the rebalance; e.g., R1 to R2- see sell off
• Outlier bids and offers can be filled
• Today expect market will push higher
• We are already long this morning

- Auriga prefers MU to SNDK. 
o Think SNDK outperformance is investor preference to SNDK’s relationship w/ AAPL. 
Lumberjack Hour 
- Tech/Media/Telecom
o Ask Dean everyday what I need to be looking for in my sectors. 
o You want to be the best tech/media/telecom trader possible. 
o Know everything
- Look to hedge positions out with indices in order to add alpha. 
- We don’t know our names. 
- We don’t know our levels. 
- We don’t know the books. 
- Make sure a name is only in one book. 
- 75% of the move in the stock is because of the market. 
Mosk 
- Use the projects as a way to also build content. 
o Learn the names
o Learn the Technicals 
o Learn the Fundamentals 
o What news can affect the name? 
- Ask questions. 
- Don’t waste time and build good content on the names in the most efficient way possible.