Buy on Friday, Sell on Monday — Then Go Away?
Germany's Bundestag (Germany's lower house) and Bundesrat (upper house) approved the $1 trillion effort to stabilize the euro, though the opposition Social Democrats voted to abstain. The German contribution will be about $183 billion, as well as a $22.4 billion euro contribution to Greece. is expected to approve it later today.
But European stocks — and U.S. stock futures — are just off their lows for the morning. Here in the U.S., volume in S&P futures took a spike as we hith the 1,060 low (in the futures) that we saw on May 6.
Lots of technical damage has already been done. Financial, materials, and energy stocks all closed below their May 6th intraday lows.
Options expiration. Part of the problem is the Street has been short volatility and short gamma — If you are short gamma you are betting that there will be little change in option pricing.
That has proven to be wrong. Volatility has spiked, and the price of options has spiked. Many active traders had little if any protection on the downside.
1) The Senate passage of their version of the financial reform bill still creating uncertainty due to the reconcilation that needs to happen between the Senate and House versions. Visa and Mastercard, for example, are down over 20 percent in the last month on a part of the bill that would limit debit card fees.
2) Buy on Friday's close, sell on Monday's close, THEN go away? I ran into an old friend, technician Frank Gretz of Wellington Shields, in front of the NYSE this morning. We talked technicals, and in the middle of the discussion he noted that Monday's have seen an amazing outperformance this year. He's right; here are the cumulative point gains for the Dow Industrials for each trading day of the year so far:
- Monday up 1,076
- Tuesday up 12
- Wednesday up 114
- Thursday down 841
- Friday down 721
3) The last of the retailers are reporting:
a) Ann Taylor reported better-than-expected Q1 earnings ($0.38 vs. $0.35 consensus) as more full-price selling helped propel margins. Sales for the women's apparel retailer were also very strong, with same-store sales up 14 percent.
Those strong margin and sales trends are expected to continue in the second quarter. Sales guidance for the full-year is also right inline with the Street's current estimates.
b) Gap Q1 earnings beat estimates ($0.45 vs. $0.43 consensus), led by strong margins, which were at their highest levels in 10 years. Same-store sales for the apparel retailer rose 4 percent in the quarter, led by stronger gains at Old Navy (up 7 percent) and Banana Republic (up 5 percent).
Guidance for the full-year was raised to $1.77-$1.82, but remains shy of the consensus estimate of $1.84
c) Borders announced it has raised $25 million through a private sale of stock. Investor Bennett Le Bow, who will also become Chairman of the company, will acquire 11.1 million shares at $2.25/share in the bookseller.
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