David Moenning's Daily State of the Markets: 6/3

June 3, 2009 9:49 AM EDT

Preparing For What Has Already Happened

Since the market did little yesterday, instead of spending our few minutes together rehashing the news, which was decent, by the way, or trying to read the tea leaves (our view is that a breakout is a breakout and yesterday did nothing to change that) I’d like to focus on a more philosophical topic this morning.

Have you ever noticed that the vast majority of guests on the financial shows have a tendency to prepare you with a stunning degree of accuracy for what has already happened? For example, in early March it was pretty tough to find anyone who had anything good to say about the stock market or the prospects for the economy. If you will recall, there were few, if any, talking heads preparing you for what came next. No, they were too busy restating the obvious and telling us how bad things were.

Yet, within just a few days, the market turned on a dime and hasn’t looked back since. But here’s the funny part; there is still a VERY large contingent of analysts, money managers, journalists, commentators, etc. who continue to insist on telling us how bad things are going to be in the future and that the current rally simply can’t last.

While I have no ability whatsoever to predict the future, I can tell you this; the stock market can do anything it pleases, any time it wants. Thus, our job is not to try and predict what Ms. Market will do next, but rather to determine what she is doing – and to try and understand WHY.

I can’t tell you how many people have told me over that last month or so with absolute certainty that stocks can’t go higher because of the economy… the earnings… the valuations… the housing market… or the consumer. It’s as if they can’t accept the fact that market environments change from time to time. And THIS is the reason that so many investors do not succeed to any great degree in the market. You see, most investors are too busy planning for a repeat of what has already happened and are thus blinded to what actually IS happening.

So, although I can’t tell you how much higher stocks will go, I can tell you this: The market is on a roll and it acts like it wants to stay that way for a while. I can also tell you that based on history stocks are likely to be higher 3, 6, and 12 months from now. And finally, I can tell you that when the market tops out and the next bear begins, there probably won’t be a lot of people looking for it.

From where I sit, this market is about the economy making the turn right now. So, until the focus shifts – and I’ll do my darndest to alert you when it does – one should pay close attention to the economic data. And as long as things continue to uptick and don’t get markedly worse, that redo of the big decline that everyone’s yammering about isn’t likely to happen.

Will we go straight up from here? Of course not and corrections of 5% or so happen all the time. But, from a big-picture standpoint, we’d surely give the bulls the benefit of the doubt for a while.

Turning to this morning, the ADP Employment Report for May (which measures employment in the private sector only) came in a bit weaker than expected at -532K vs. -525K. In addition, we’ll get reports on the ISM Non-Manufacturing Index and Factory Orders at 10:00 am.

Running through the rest of the pre-game indicators, the major overseas markets are mixed my region. Crude futures are moving lower with the latest quote showing oil trading down $0.67 at $67.88. On the interest rate front, we’ve got the yield on the 10-yr trading at 3.57%, while the yield on the 3-month T-Bill is trading at 0.11%. 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 44 points; the S&P’s are down about 5 points, while the NASDAQ looks to be about 5 points below fair value at the moment.

Stocks “In Play” This Morning:

Today’s Earnings Before the Bell:

Joy Global (Nasdaq: JOYG) – Reported $1.17 vs. $0.89
Toll Brothers (NYSE: TOL) – Reported -$0.52 vs. -$0.50
Williams Sonoma (NYSE: WSM) – Reported -$0.14 vs. -$0.21

Upgrades/Downgrades/Brokerage Research:

Apple (Nasdaq: AAPL) – Estimates and target increased at BMO Capital
Invesco (NYSE: IVZ) – Upgraded at Citi
T. Rowe Price (Nasdaq: TROW) – Upgraded at Citi
Franklin Resources (NYSE: BEN) – Upgraded at Citi
Legg Mason (NYSE: LM) – Upgraded at Citi
Blackrock (NYSE: BLK) – Target increased at Citi
Aetna (NYSE: AET) – Downgraded at Credit Suisse, Wachovia
Brocade (Nasdaq: BRCD) – Removed from Buy list at Goldman
Hess Corp (NYSE: HES) – Mentioned positively at Goldman
Google (Nasdaq: GOOG) – Target increased at Goldman
Plantronics (NYSE: PLT) – Upgraded at JP Morgan
Newmont Mining (NYSE: NEM) – Upgraded at JP Morgan
Kinross Gold (NYSE: KGC) – Downgraded at JP Morgan
Comerica (NYSE: CMA) – Upgraded at JP Morgan
Phillip Morris (NYSE: PM) – Estimates increased at Morgan Stanley
State Street (NYSE: STT) – Mentioned positively at Rochdale
Mosaic (MOS) – Estimates reduced at UBS

Long positions in stocks mentioned: JPM, AAPL, BLK

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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• Credit Suisse
• UBS
• ADP Employment Report
• Factory Orders
• JPMorgan
• ISM Non-Manufacturing
• Citi
• Morgan Stanley
• Wachovia
• BMO Capital
• Standard & Poor's
• David Moenning
• Crude Oil

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