David Moenning's Daily State of the Markets:

Same Story, Different Day (Again)

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

Stocks experienced a case of déjà vu yesterday as traders seemed to have locked on to the trend of buying what has been bad and selling what had been good. In English, this means that anything in the energy and materials complex had another rough go while anyone rummaging around in last month’s 52-week low list was again rewarded handsomely. And this, of course, led to another round of green screens on the major indices.

The energy arena wound up on the defensive again yesterday as August crude futures fell another -$3.98 to close at the bargain basement price of $125.44. This was the lowest close since June 4th and was caused by two factors. First, Hurricane Dolly took a turn for the best and managed to narrowly miss the installations in the Gulf of Mexico. And second, while the supply of crude oil remains lower than projections, the Department of Energy did report a rather large build in the supply of gasoline – 2.9 million barrels, to be exact. In addition, it appears that we are indeed seeing a reduction in the demand for gasoline, at least here in the U.S., to the tune of 2.4% over the past year.

Next up, what day would be complete without some bank earnings that weren’t quite as horrible as had been expected. And while the blast in the financials definitely slowed yesterday, it is worth noting that the XLF (the Financials SPDR) is almost 31% off its low in the last six trading sessions.

Part of the explanation for the upbeat feeling regarding the financials lately has to do with the fact that the House and Senate leaders managed to reach a compromise on the housing support bill that will allow the government to insure up to $300 billion in refi mortgages and also provide an official backstop to Fannie, Freddie, and the gang. As a result, Fannie Mae (FNM) tacked on another +11.9% to its stock value yesterday and is now up 112% over the past week or so.

So, with the earnings reports not coming in as badly as analysts had been projecting, a housing rescue package coming to fruition, and oil back at levels that are simply rude – as opposed to obscene – we are starting to see traders dig around in other areas that have been beaten to a pulp lately as the “dead cat bounce” continues right on schedule.

However, while we hate to be party poopers, we are fairly confident that any trader with a computer screen and a keyboard is aware of the fact that the major indices are either rapidly approaching, or have arrived at major resistance levels. In fact, both the Dow and the S&P 500 bumped their heads on one of Mr. Fibonacci’s retracement levels yesterday, so it will be interesting to see how the markets perform from here.

Turning to this morning, the economic calendar remains light. However the weekly Jobless Claims number did come in on the weak side as those filing for unemployment rose to 406,000 this week, which was a bit higher than the 380K level that had been expected.

Running through the rest of the pre-game indicators; the major foreign markets are split by region with Asia up and Europe down. Crude futures are moving up with the latest quote showing oil trading higher by $0.66 to $125.10. Interest rates are higher this morning with the yield on the 10-yr currently trading at 4.15%. And finally, with about an hour before the bell, stock futures in the U.S. are pointing to a mixed to lower open. The Dow futures are currently off by about 42 points; the S&P’s are down about 3 points, while the NASDAQ looks to be about 4 points above fair value at the moment.

Stocks "In Play" This Morning:

Yesterday's Earnings After the Bell:

AFLAC (NYSE: AFL) – Reported $1.01 vs. $1.01
Amerigroup (NYSE: AGP) – Reported $0.68 vs. $0.48
Allstate (NYSE: ALL) – Reported $1.24 vs. $1.30
Amazon.com (Nasdaq: AMZN) – Reported $1.01 vs. $0.87
Amerprise Financial (NYSE: AMP)– Reported $0.28 vs. $0.26
CR Bard (NYSE: BCR)�– Reported $1.10 vs. $1.08
Baidu (Nasdaq: BIDU) – Reported $1.23 vs. $1.05
Chipotle Mexican Grill (NYSE: CMG) – Reported $0.74 vs. $0.75
Kirby Corp (NYSE: KEX) – Reported $0.74 vs. $0.73
Knight Transportation (NYSE: KNX) – Reported $0.15 vs. $0.15
McKesson (NYSE: MCK) – Reported $0.83 vs. $0.80
Noble Corp (NYSE: NE) – Reported $1.40 vs. $1.32
Pulte Homes (NYSE: PHM) – Reported -$0.85 vs. -$0.82
Ryland (NYSE: RYL) – Reported -$5.70 vs. -$0.85
SLM Corp (NYSE: SLM) – Reported $0.27 vs. $0.40
Sybase (NYSE: SY) – Reported $0.49 vs. $0.43
Terex (NYSE: TEX) – Reported $2.32 vs. $1.98
Tupperware (NYSE: TUP) – Reported $0.75 vs. $0.67
MEMC Elec Mat (NYSE: WFR) – Reported $0.92 vs. $1.01

Today’s Earnings Before the Bell:

AmerisourceBergen (NYSE: ABC) – Reported $0.73 vs. $0.66
Ashland (NYSE: ASH) – Reported $1.13 vs. $0.87
Bristol Myers (NYSE: BMY) – Reported $0.43 vs. $0.40
Celgene (Nasdaq: CELG) – Reported $0.37 vs. $0.35
Diamond Offshore (NYSE: DO) – Reported $2.99 vs. $2.76
Dow Chemical (NYSE: DOW) – Reported $0.81 vs. $0.85
ITT Educational Svcs (NYSE: ESI) – Reported $1.20 vs. $1.06
Ford (NYSE: F) – Reported -$0.62 vs. -$0.25
Goodrich (NYSE: GR) – Reported $1.46 vs. $1.08
Starwood Hotels (NYSE: HOT) – Reported $0.56 vs. $0.52
Janus Capital (NYSE: JNS) – Reported $0.34 vs. $0.30
Kinetic Concepts (NYSE: KCI) – Reported $0.98 vs. $0.93
Eli Lilly (NYSE: LLY) – Reported $0.99 vs. $1.00
Southwest Air (NYSE: LUV) – Reported $0.16 vs. $0.12
Medco Health (NYSE: MHS) – Reported $0.56 vs. $0.54
3M (NYSE: MMM) – Reported $1.39 vs. $1.35
Newmont Mining (NYSE: NEM) – Reported $0.51 vs. $0.48
Occidental Petroleum (NYSE: OXY) – Reported $2.79 vs. $2.77
Potash (NYSE: POT) – Reported $2.82 vs. $2.61
Qualcomm (Nasdaq: QCOM) – Reported $0.55 vs. $0.55
Radio Shack (NYSE: RSH) – Reported $0.35 vs. $0.26
Raytheon (NYSE: RTN) – Reported $1.00 vs. $0.92

News, Upgrades/Downgrades/Brokerage Research:

CEMEX (NYSE: CX) – Upgraded at BB&T Capital Markets
MEMC Electronic Mat (NYSE: WFR) – Upgraded at Citi, JP Morgan
Boeing (NYSE: BA) – Downgraded at Cowen
Telefonica (NYSE: TEF) – Downgraded at Credit Suisse
TJX Companies (NYSE: TJX) – Downgraded at Credit Suisse
McDonalds (NYSE: MCD) – Downgraded at Deutsche Bank
AT&T (NYSE: T) – Downgraded at JP Morgan
Citigroup (NYSE: C) – Upgraded at Morgan Stanley
First Horizon Natl (NYSE: FHN) – Upgraded at Morgan Stanley
Automatic Data Processing (NYSE: ADP) – Downgraded at Morgan Stanley
Raymond James (NYSE: RJF) – Downgraded at Wachovia

Disclosure: Mr. Moenning and/or related firms hold long positions in: POT, TMO

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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