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Keystone Morning Quickie$

Keystone Morning Quickie October 12th 2009

Market Commentary

The Columbus Day holiday is starting off with a rise in the futures after a surprise profit from Phillips Electronics. The bond market will be closed today and their are no economic numbers on the calendar.

The rise in the futures is also in response to the good economic data last week and the expectations that these numbers will continue to improve. From a trading perspective, we do not have much expectation for today’s trade. Volume should be fairly light as many traders are are using the day for an extra day off.

We are still monitoring the $108 level on the $SPY. If we trade above there with any type of volume, we expect a fast move higher. The SPY have traded higher 6 days in a row. That being said, it would be no surprise to us, if they pullback a bit, even just to trade back to the 20 EMA on the Daily which is $105.09

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Technical Levels

50 Day 200 Day
S&P 1029 904
DOW 9521 8494
NASDAQ 2046 1744
Keystone’s Trades

Cisco Systems(CSCO) long trade – Closing Price: $24.03

On Fridays CSCO closed above $24 , which had been fairly stiff resistance. The volume was alittle bit lighter than we would have liked to see, however, it is not to be ignored that techs have been solidly strong and CSCO still reamins a market leader. If we can hold the $24 level this morning and the market internals show strength, we will be buyers. We do not see resistance till at least $25.12

Profit target: $25.12

stop loss: $23.62

Qualcomm (QCOM) Short sale – closing price:$
41.70

QCOM has been a stock the has certainly been weaker than the overall market, however it tends to suck you into the short side early in the morning and then rally back for the rest of the day. On friday, the volume on the first hourly candle was almost 8 million shares, which is way above the normal volume. The stock traded below the 200 ema for a short time but the increased volume marked exhaustion and it rallied most of the day. We willl coninue to look for a short entry with it ultimately trading below the 200 again. We would like to see it bounce a bit more before entry. A short around $43 looks good to us

target:$39.88

Stop loss: $ 44

Economic Calendar

1:15 PM Treasury’s Alan Krueger speaks: A View from the Treasury

Notable earnings before Monday’s open: FAST, PHG, SCHW

Top News Stories

Cnooc covets Exxon’s Ghana deal. Chinese state-owned CNOOC (CEO) is reportedly in advanced JV talks with Ghana National Petroleum to pitch a rival bid to ExxonMobil’s (XOM) $4B offer for Kosmos Energy’s 23.5% stake in the giant Jubilee oil discovery. News of Exxon’s agreement with Kosmos last week infuriated the Ghanaian government and GNPC, which was trying to boost its existing 13.8% stake in the field. But insiders recently said they were confident Ghana would approve the sale to Exxon because of its superior expertise in developing the find quickly and on budget, while handing the field over to the untested Chinese could be a gamble.

Dollar dumping gets serious. Central banks are making good on their threats to dump the dollar, with 63% of the $413B policy makers poured into foreign currency holdings last quarter going to the euro and yen. While some see the move as reflecting a dim view on the U.S.’s policies and future, others say the diversification is no more than a reduction of concentration risks (and some actually think it’s good news!). The record-breaking diversification likely means the greenback won’t rebound any time soon after losing 10.3% vs. a basket of currencies over the past half year.

Bullard: ease up on the QE! St. Louis Fed president James Bullard on Sunday repeated his call to adjust the Fed’s $1.75T scheme to buy mortgage loans and Treasurys, especially in light of its increasingly optimistic outlook of the economy. “There has been little indication of how or whether these amounts might be adjusted given incoming information on economic performance,” he said, voicing concerns the policy is creating uncertainty in the markets, and could ultimately ignite inflation. (read Bullard’s full sp eech (.pdf))

Summers talks up stimulus. Top Obama advisor Larry Summers defended the government’s stimulus efforts in a letter to Republican House Leader John Boehner this morning: “Thanks largely to the Recovery Act, alongside an aggressive financial stabilization plan and a program to keep responsible homeowners in their homes, we have walked a substantial distance back from the economic abyss and are on the path toward economic recovery.” Summers said the president will not be satisfied until the U.S. returns to “robust job growth,” and called the significant reduction in the pace of job loss over the last six months “an essential first step in that direction.”

Killer quarter coming up. Economists boosted their Q3 GDP growth outlook to 3.2% – the strongest in two years – fueled by a rebound in personal consumption expenditures, the first increase in residential investment since the Q1 2005, and a reduced rate of business inventory reduction.

KB faces accounting probe. KB Home (KBH) disclosed it’s being investigated by the SEC over accounting and disclosure issues, adding to the homebuilders legal issues, not to mention a still soft U.S. housing market. In May, homeowners brought a federal racketeering lawsuit against KB, accusing it of colluding with Countrywide and appraiser LandSafe to fraudulently inflate sales prices of KB homes. Shares -4% premarket.

Blackstone to list eight firms, sell five. Blackstone (BX) is planning to publicly list up to eight of its portfolio companies. According to a letter sent to investors Friday, Blackstone is positioning hospital staffing firm Team Health for an IPO, and assessing the potential for seven others. The letter also says Blackstone is in the process of five realizations (exits), which sources say includes the sale of its stake in Kosmos Energy’s Ghanian oil interests (see above for more on this).

Lazard’s CEO hospitalized with serious heart condition. Lazard (LAZ) chairman and CEO Bruce Wasserstein was hospitalized over the weekend for ‘serious’ heartbeat irregularity. Wasserstein, 61, is personally leading the team advising Kraft (KFT) on its $16B takeover bid for Cadbury (CBY). Experts say a company’s ability to continue functioning after the incapacity of a CEO depends significantly on his level of day-to-day interaction with operations, which in Wasserstein’s case is high. Shares were down about 1% in Frankfurt Monday morning. (read Lazard’s statement)

Citigroup fined by Finra. Sources say Citigroup (C) will pay $600,000 to settle charges it failed to supervise international customers, thereby allowing them to avoid dividend taxes. Citigroup has already paid the IRS $24M in taxes to settle claims it concocted derivatives to help clients circumvent taxes.

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