Daily State of the Markets 8/4: Bad Data, Good Action?
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There are many different strategies traders employ in their attempt to outfox Ms. Market on a daily basis. One of the more popular approaches is to try and gauge the action in the market relative to the news. This is the premise behind the cliché, "it's not the news, but how the market reacts to the news that matters." And although stocks were lower yesterday, the "action" was pretty good, all things considered.
Another way to look at it is to say that the bears had plenty of data points to work with yesterday and that the table was set for a decline. As such, the fact that the Dow managed to give back a measly 38 points has to be considered good action.
After Monday's big pop to the upside, we have to recognize that the market was overbought from both a short- and intermediate-term time frame and thus, some profit-taking was to be expected. In addition, the technical picture presented a tale of two markets with both the Dow and S&P appearing to have broken out to the upside while the NASDAQ, Russell 2000, and Midcaps continue to be stuck in a trading range. Therefore, this situation could have easily led to the dreaded "breakout fakeout" on some bad news.
And bad news is what traders got on the economic front yesterday. In addition to an awful lot of chatter about the FOMC changing course (albeit just symbolically) , traders were treated to less than inspiring reports on Personal Income and Spending, Pending Home Sales, and Factory Orders. Had this triumvirate of bad news come out a month ago, stocks would have tanked. However, despite the market appearing to be set up for a pullback, the selling was light and the technical action was pretty darned positive.
So, as we've been saying recently, it appears that the environment has indeed improved now that the idea that the economies of the world are about to stop on a dime has been pushed to the back burner. The short-term trend is higher, the intermediate-term trend is now neutral, and the correction appears to have ended. All in all - not a bad situation. Sure, things are likely to remain tricky and news-driven. But it sure beats the doom-and-gloom of a month ago, eh?
Turning to this morning... despite some soft data out of Europe and some conflicting data on jobs, the pre-game indicators are pointing northward at the present time.
On the economic front... Challenger says that planned job cuts were up again in June (the third consecutive monthly increase). However, ADP reported that the private sector job market expanded for the fifth straight month in July. The report shows that private sector jobs grew by 42,000 jobs during the month, which was a bit above the consensus expectations for a gain of about 28.3K.
Finally, remember to think positive today...
Pre-Game Indicators
Here are the important indicators we review each morning before the opening bell...
Major Foreign Markets:
Australia: -0.58%
Shanghai: +0.44%
Hong Kong: +0.43%
Japan: -2.11%
France: -0.11%
Germany: -0.28%
London: -1.10%
Crude Oil Futures: + $0.05 to $82.60
Gold: + $11.60 to $1197.70
Dollar: higher against Yen, lower vs. Euro and Pound
10-Year Bond Yield: Currently trading lower at 2.90%
Stocks Futures Ahead of Open in U.S. (relative to fair value):
S&P 500: +3.89
Dow Jones Industrial Average: +32
NASDAQ Composite: +5.84
Wall Street Research Summary
Upgrades:
Leap Wireless (LEAP) - AURIGA
MetLife (MET) - BofA/Merrill
Barnes & Noble (BKS) - Goldman Sachs
Parexel (PRXL) - Added to Conviction Buy at Goldman
Downgrades:
FirstEnergy (FE) - FBR Capital
Dow Chemical (DOW) - Goldman Sachs
American Electric Power (AEP) - Goldman Sachs
Eli Lilly (LLY) - Jefferies
Emulex (ELX) - Jefferies
Burger King Holdings (BKC) - RW Baird
Parker-Hannifin (PH) - Wells Fargo
Earnings After the Bell:
Americredit ACF $0.61 v $0.42
Anadarko Petroleum APC $0.49 v $0.37
CBS Corporation CBS $0.25 v $0.21
Chesapeake Energy CHK $0.75 v $0.69
Electronic Arts ERTS -$0.24 v -$0.35
Harris Corp HRS $1.24 v $1.23
Molex MOLX $0.39 v $0.38
ONEOK Inc OKE $0.39 v $0.31
Pitney Bowes PBI $0.48 v $0.57
Priceline.com PCLN $3.09 v $2.65
Unum Group UNM $0.69 v $0.67
Whole Foods WFMI $0.38 v $0.37
XL Capital XL $0.71 v $0.64
Earnings Before The Bell
Allegheny Energy AYE $0.57 v $0.38
Cameron Intl CAM $0.58 v $0.55
CenturyLink CTL $0.88 v $0.85
Devon Energy DVN $1.53 v $1.42
El Paso EP $0.22 v $0.21
Garmin GRMN $0.85 v $0.73
IntercontinentalExchange ICE $1.51 v $1.41
Pulte Group PHM $0.20* v -$0.02
Quanta Services PWR $0.18 v $0.18
Qwest Q $0.09 v $0.09
Polo Ralph Lauren RL $1.21 v $0.89
RR Donnelley RRD $0.47 v $0.36
Spectra Energy SE $0.27 v $0.29
Time Warner TWX $0.50 v $0.45
Cimarex XEC $1.46 v $1.49
* Report includes items that make comparisons to the consensus estimate questionable
Long positions in stocks mentioned: OKE, ACF
For more "top stock" portfolios and research, visit TopStockPortfolios.com
The opinions and forecasts expressed are those of David Moenning, founder of TopStockPortfolios.com and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of TopStockPortfolios and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Stocks should always consult an investment professional before making any investment.
Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.
The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.
The information contained in our websites and TopStockPortfolios publications is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer.
Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.
Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.
Another way to look at it is to say that the bears had plenty of data points to work with yesterday and that the table was set for a decline. As such, the fact that the Dow managed to give back a measly 38 points has to be considered good action.
After Monday's big pop to the upside, we have to recognize that the market was overbought from both a short- and intermediate-term time frame and thus, some profit-taking was to be expected. In addition, the technical picture presented a tale of two markets with both the Dow and S&P appearing to have broken out to the upside while the NASDAQ, Russell 2000, and Midcaps continue to be stuck in a trading range. Therefore, this situation could have easily led to the dreaded "breakout fakeout" on some bad news.
And bad news is what traders got on the economic front yesterday. In addition to an awful lot of chatter about the FOMC changing course (albeit just symbolically) , traders were treated to less than inspiring reports on Personal Income and Spending, Pending Home Sales, and Factory Orders. Had this triumvirate of bad news come out a month ago, stocks would have tanked. However, despite the market appearing to be set up for a pullback, the selling was light and the technical action was pretty darned positive.
So, as we've been saying recently, it appears that the environment has indeed improved now that the idea that the economies of the world are about to stop on a dime has been pushed to the back burner. The short-term trend is higher, the intermediate-term trend is now neutral, and the correction appears to have ended. All in all - not a bad situation. Sure, things are likely to remain tricky and news-driven. But it sure beats the doom-and-gloom of a month ago, eh?
Turning to this morning... despite some soft data out of Europe and some conflicting data on jobs, the pre-game indicators are pointing northward at the present time.
On the economic front... Challenger says that planned job cuts were up again in June (the third consecutive monthly increase). However, ADP reported that the private sector job market expanded for the fifth straight month in July. The report shows that private sector jobs grew by 42,000 jobs during the month, which was a bit above the consensus expectations for a gain of about 28.3K.
Finally, remember to think positive today...
Pre-Game Indicators
Here are the important indicators we review each morning before the opening bell...
Major Foreign Markets:
Australia: -0.58%
Shanghai: +0.44%
Hong Kong: +0.43%
Japan: -2.11%
France: -0.11%
Germany: -0.28%
London: -1.10%
Crude Oil Futures: + $0.05 to $82.60
Gold: + $11.60 to $1197.70
Dollar: higher against Yen, lower vs. Euro and Pound
10-Year Bond Yield: Currently trading lower at 2.90%
Stocks Futures Ahead of Open in U.S. (relative to fair value):
S&P 500: +3.89
Dow Jones Industrial Average: +32
NASDAQ Composite: +5.84
Wall Street Research Summary
Upgrades:
Leap Wireless (LEAP) - AURIGA
MetLife (MET) - BofA/Merrill
Barnes & Noble (BKS) - Goldman Sachs
Parexel (PRXL) - Added to Conviction Buy at Goldman
Downgrades:
FirstEnergy (FE) - FBR Capital
Dow Chemical (DOW) - Goldman Sachs
American Electric Power (AEP) - Goldman Sachs
Eli Lilly (LLY) - Jefferies
Emulex (ELX) - Jefferies
Burger King Holdings (BKC) - RW Baird
Parker-Hannifin (PH) - Wells Fargo
Earnings After the Bell:
Americredit ACF $0.61 v $0.42
Anadarko Petroleum APC $0.49 v $0.37
CBS Corporation CBS $0.25 v $0.21
Chesapeake Energy CHK $0.75 v $0.69
Electronic Arts ERTS -$0.24 v -$0.35
Harris Corp HRS $1.24 v $1.23
Molex MOLX $0.39 v $0.38
ONEOK Inc OKE $0.39 v $0.31
Pitney Bowes PBI $0.48 v $0.57
Priceline.com PCLN $3.09 v $2.65
Unum Group UNM $0.69 v $0.67
Whole Foods WFMI $0.38 v $0.37
XL Capital XL $0.71 v $0.64
Earnings Before The Bell
Allegheny Energy AYE $0.57 v $0.38
Cameron Intl CAM $0.58 v $0.55
CenturyLink CTL $0.88 v $0.85
Devon Energy DVN $1.53 v $1.42
El Paso EP $0.22 v $0.21
Garmin GRMN $0.85 v $0.73
IntercontinentalExchange ICE $1.51 v $1.41
Pulte Group PHM $0.20* v -$0.02
Quanta Services PWR $0.18 v $0.18
Qwest Q $0.09 v $0.09
Polo Ralph Lauren RL $1.21 v $0.89
RR Donnelley RRD $0.47 v $0.36
Spectra Energy SE $0.27 v $0.29
Time Warner TWX $0.50 v $0.45
Cimarex XEC $1.46 v $1.49
* Report includes items that make comparisons to the consensus estimate questionable
Long positions in stocks mentioned: OKE, ACF
For more "top stock" portfolios and research, visit TopStockPortfolios.com
The opinions and forecasts expressed are those of David Moenning, founder of TopStockPortfolios.com and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of TopStockPortfolios and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Stocks should always consult an investment professional before making any investment.
Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.
The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.
The information contained in our websites and TopStockPortfolios publications is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer.
Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.
Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.
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