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David Moenning's Daily State of the Markets: 4/6

April 6, 2009 9:20 AM EDT

Looking Forward?

Although the stock market is overbought and there is some significant resistance looming overhead, it would appear that traders are beginning to look ahead instead of back. Friday’s action was a perfect example of this as it would have been very easy for the bears to take one look at the jobs report and proclaim there was no hope in sight for the economy. But not only did our furry friends not get a vicious selloff – or even a modest selloff for that matter – the bulls managed to turn the tables on their opponents and rule the day once again.

Yes, we recognize that the volume was unimpressive. And yes, the economic data was a bit of a bummer. But the breadth was stellar and as any trader worth their salt knows, a market that can’t go down on bad news is one that wants to go higher. And higher is where we ended on Friday.

Make no mistake about it; Friday’s jobs report was not encouraging. The Labor Department reported that the economy shed another 663,000 jobs in March, bringing the total number of jobs lost for the year to over 2 million and the grand total since the beginning of the recession to 5.1 million. The unemployment rate shot up to 8.5% and most analysts believe we’ll see 9% or so before this thing is over.

However, traders may have liked the fact that the jobs report wasn’t worse than expected for a change or that February’s numbers weren’t revised lower. After all, just about every economic report we’ve seen lately has come in above analyst expectations. This isn’t to say that the numbers have been good or that they are actually improving. But we must remember that the first step on the road to recovery is for things to stop getting worse. And THIS is what we seem to be dealing with at the moment.

Along these lines, Barack Obama’s top economic adviser Lawrence Summers said in an interview with the WSJ on Friday that while job losses will likely continue in the coming months, the sense of “freefall” in the economy should dissipate.

In sum, it is the positive sentiment surrounding the recent signs of economic stabilization in both the U.S. and global economies that appears to be driving the action at the moment. This represents a classic case of stocks discounting the future as the market usually turns higher long before any signs of actual economic improvement appear. So, analysts everywhere will be keeping a keen eye out for any signs of improvement in the coming months.

However, the next challenge for the bulls will be the upcoming earnings season. Alcoa (AA) kicks off the parade on Tuesday and things really start to roll next week. And since nobody expects the numbers to be good, it will be very interesting to see how the market reacts to what should be some pretty dismal numbers.

Turning to this morning, we don’t have any economic data to review today. However it would appear that there are some jitters this morning ahead of earnings season and the bank stress tests currently underway.

Running through the rest of the pre-game indicators, the overseas markets are higher across the board. Crude futures are moving down with the latest quote showing oil trading off $0.75 to $51.76. On the interest rate front, we’ve got the yield on the 10-yr currently at 2.88%, while 3-month LIBOR is at 1.16% and the yield on the 3-month T-Bill is trading at 0.19%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a lower open. The Dow futures are currently off by about 50 points; the S&P’s are down by about 7 points, while the NASDAQ looks to be about 14 points below fair value at the moment.


Stocks “In Play” This Morning:

Today’s Corporate News, Upgrades/Downgrades/Brokerage Research:

Cimarex (NYSE: XEC) – Upgraded at BAC/MER
Royal Dutch Shell (NYSE: RDS.A) – Downgraded at BAC/MER
Corning (NYSE: GLW) – Estimates increased at Barclays
Apple (Nasdaq: AAPL) – Estimates increased at Barclays
Viacom (NYSE: VIA.B) – Downgraded at Barclays
Blue Nile (Nasdaq: NILE) – Downgraded at Citi


Ternium SA (NYSE: TX) – Downgraded at Deutsche Bank
Celanese (NYSE: CE) – Downgraded at Goldman
Cisco Systems (Nasdaq: CSCO) – Downgraded at Goldman
CA Inc (NYSE: CA) – Downgraded at Jefferies
Novell (Nasdaq: NOVL) – Downgraded at Jefferies
Bucyrus (Nasdaq: BUCY) – Upgraded at JP Morgan
Joy Global (Nasdaq: JOYG) – Upgraded at JP Morgan
Campbell Soup (NYSE: CPB) – Downgraded at JP Morgan
SBA Communications (Nasdaq: SBAC) – Downgraded at RBC Capital
American Tower (NYSE: AMT) – Downgraded at RBC Capital
BMC Software (NYSE: BMC) – Downgraded at UBS
Abbott Labs (NYSE: ABT) – Downgraded at Wachovia

Disclosure: Mr. Moenning and/or related firms hold long positions in: SBAC, BMC

Note: All earnings reports compared to Reuter’s consensus estimates

** For More of David Moenning’s Market Analysis, Stock Portfolios, and Trading Ideas, visit: www.TopStockPortfolios.com

The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management and Co-Founder of TopGunsTrading.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 of any specific security or Heritage Capital program. No part of this material is intended as an investment recommendation. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any of HCM’s programs. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that investment objectives outlined will actually come to pass. Investors should consult an Investment Professional before investing in any investment program. Neither Mr. Moenning or Heritage Capital Management nor any of their employees shall have any liability for any loss sustained by anyone who has relied on the information contained herein. Mr. Moenning and employees of HCM may at times have positions in the securities referred to and may make purchases or sales of these securities while this publication is in circulation. The analysis contained is based on both technical and fundamental research. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.


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