David Moenning's Daily State of the Markets:

When These Guys Talk...

Here's a link to listen to an Audio Version of the report

One of THE most important things to learn about the game of managing money in the stock market is to understand who to listen to and who to ignore. In short, far too many investors listen to anybody and everybody offering up an opinion. And with conflicting views on just about every topic provided every hour on the hour, it is little wonder that the average investor has a hard time seeing the big picture.

So, here’s a tip or two on the subject based on what I’ve learned over the last twenty-plus years: When T. Boone Pickens talks about oil, people listen. And when Goldman Sachs talks about – well, just about anything – people definitely sit up and take notice. But, when T. Boone Pickens and Goldman Sachs talk about the same thing at the same time, apparently people just buy with both hands!

Two days ago, oil was trading at what felt like the very high level of $127. But then after both Boone Pickens and Goldman made projections about the price of crude becoming downright obscene, we find oil trading this morning at $135. This represents a move of 6.3% in just a little over two days time with little to no fundamental news to drive prices higher.

So, with the upside target for crude now sitting at $150 or higher and no sellers in sight, the question that is running through the minds of stock market investors is when will the latest surge in oil show up in the economy? To date, the markets have handled the steady rise in crude fairly well. But with oil up more than 40% so far this year, the move is certain to have an impact soon.

The other problem for the stock market yesterday was the fact that the Fed announced there isn’t much more they can do with regard to the economy. The minutes from the latest FOMC meeting made it clear that the Mr. Bernanke & Co. are done cutting rates, even if the economy were to weaken from here. With inflation doing anything but moderating, the Fed will be forced to turn its attention to the fight against inflation as soon as possible. So, I guess the good news is that the Fed has done a good job keeping the banking system afloat. But the bad news is that Mr. Bernanke will start raising rates as soon as things stabilize in the economy.

So with oil prices rising and the cavalry on the sidelines, it is little wonder that stocks dropped another 227 points yesterday. But, we also need to remember that the major points to this story aren’t exactly new. And with the market having enjoyed a nice run, a pullback was to be expected. Therefore, as prices come in, traders will be looking to load back up on long positions. So, the question now becomes: When will the market look oversold enough for traders to step up to the plate?

Turning to this morning, as we mentioned, oil continues to move higher. On the economic front, the weekly jobless claims numbers came in a smidge better than expected but haven’t really had an impact on trading.

Running through the rest of the pre-game indicators; with the exception of Japan, the foreign markets are all lower. Crude futures are moving up again with the latest quote showing oil trading higher this time by $1.39 to $134.56. Interest rates are moving up as the yield on the 10-yr is currently trading at 3.87%. And finally, with about an hour before the bell, stock futures in the U.S. are pointing to a flat open at the moment. The Dow futures are currently higher by about 11 points; the S&P’s are up by about a point, while the NASDAQ looks to be about even with fair value at the moment.

Stocks "In Play" This Morning:

Yesterday’s Earnings After the Bell:

SalesForce.com (NYSE: CRM) – Reported $0.08 vs. $0.07
Computer Sciences Corp (NYSE: CSC) – Reported $1.44 vs. $1.40
Limited (NYSE: LTD) – Reported $0.11 vs. $0.08
Petsmart (Nasdaq: PETM) – Reported $0.32 vs. $0.31

Today’s Earnings Before the Bell:

Ann Taylor (NYSE: ANN) – Reported $0.47 vs. $0.46
Patterson UTI Energy (Nasdaq: PTEN) – Reported $0.51 vs. $0.51

News, Upgrades/Downgrades/Brokerage Research:

America Movil (NYSE: AMX) – Upgraded at Deutsche Bank
First Marblehead (NYSE: FMD) – Upgraded at Friedman Billings
Ternium (NYSE: TX) – Upgraded at Goldman
Solarfun Power Holdings (Nasdaq: SOLF) – Downgraded at Goldman
Akamai Technologies (Nasdaq: AKAM) – Downgraded at Goldman
SalesForce.com (NYSE: CRM) – Upgraded at Jefferies
Barclays (NYSE: BCS) – Downgraded at Lehman
Eaton Vance (NYSE: RV) – Upgraded at Merrill Lynch
Alcoa (NYSE: AA) – Downgraded at Merrill Lynch
Alpha Natural Resources (NYSE: ANR) – Upgraded at Merrill Lynch
Heinz (NYSE: HNZ) – Downgraded at Merrill Lynch
Level 3 Communications (Nasdaq: LVLT) – Upgraded at Wachovia

Disclosure: Mr. Moenning and/or related firms hold long positions in: CRM

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.TopGunsTrading.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.


David D. Moenning
Heritage Capital Management
Main: 630-250-4700
Direct: 303-670-9761
email: [email protected]

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