David Moenning's Daily State of the Markets: 4/17

When Will It End?

If you stand at the corner of Broad and Wall and listen very carefully, you will likely hear cries of angst off in the distance from underinvested money managers. You see, to anyone holding short positions or still on the sidelines, the cry nowadays is “when will it end?”

Although most investors probably want to simply forget about everything that happened last fall as quickly as possible, you may recall that several very large and very well known hedge fund managers announced to the world in October that they were moving out of stocks. While this was all well and good during the time the market was cratering, now that the S&P is higher than it was then means that the warm and cozy cash position might be getting a little uncomfortable.

As anyone who has been looking to “buy the dips” over the last three weeks can attest, the opportunities to put money to work into a decline in stock prices have been few and far between. And in keeping with the old Wall Street saw, “once is a trend, twice is a tradition, and three times is a commandment,” it is also now obvious that pullbacks only last one or two days right now.

The point, you ask? If you listen to anyone on TV talk about the current stock market, you will undoubtedly hear the words “overbought,” “extended,” and/or “frothy” used. Anyone who has ever drawn a trendline with their mouse or the old fashioned way using a ruler knows the current trend has gone farther than most, and is becoming a bit overdone. For example, in case you haven’t tired of me espousing this historical fact, the current run is considered to be the best in 75 years.

However, even the perma-bulls will readily admit that trees don’t grow to the sky and even during the best of times the bears usually have their day in the sun every once in a while. And since most investors are well aware of this fact AND no one is completely sure that this is the greatest time to be throwing caution to the wind, most everybody and their grandmother is waiting for a pullback to buy.

Except those who are watching the indices pass them by, that is. In the rather competitive world of hedge fund management, you are only as good as your last monthly report. Therefore, the absolute last thing you want to see is the Dow or S&P 500 put up numbers that are superior to yours. So, with the S&P 500 up +27.9% since March 9th, it would appear that there is a growing number of money managers who are throwing in the towel and buying. And yesterday’s 95 point rally was a perfect example of this.

So, when will it end? Honestly, now that we’ve gotten to this phase, the answer is anybody’s guess. Since the best earnings reports usually are released early, it might be a spate of bad earnings that puts the bears back in charge for more than a day or two. Or perhaps some piece of data will come out that pokes a hole in the current theory that we’re turning the corner in the economy. But the bottom line is that something will come along to put some fear back in the game at some point. However, as we’ve mentioned, the question of when this will occur is a little tricky right now.

Turning to this morning, we don’t have any economic news to report before the bell but we do have the earnings reports from GE (GE) and Citi (C) to contend with. Both companies posted results which were better than the Reuters estimates, which seems to have given the futures a little boost.

Running through the rest of the pre-game indicators, the major overseas markets are up nicely. Crude futures are moving up again with the latest quote showing oil trading higher by $0.64 to $50.62. On the interest rate front, we’ve got the yield on the 10-yr currently at 2.87%, while the yield on the 3-month T-Bill is trading at 0.13%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a relatively flat open. The Dow futures are currently ahead by about 11 points; the S&P’s are up about 2 points, while the NASDAQ looks to be about 4 points below fair value at the moment.

Stocks “In Play” This Morning:

Yesterday’s Earnings After the Bell:

Amylin Pharmaceuticals (Nasdaq: AMLN) – Reported -$0.34 vs. -$0.35
Biogen Idec (Nasdaq: BIIB) – Reported $1.05 vs. $1.01
Google (Nasdaq: GOOG) – Reported $5.16 vs. $4.92
Werner Enterprises (Nasdaq: WERN) – Reported $0.10 vs. $0.09

Today’s Earnings Before the Bell:

BB&T Corp (NYSE: BBT) – Reported $0.51 vs. $0.32
Citi (NYSE: C) – Reported -$0.18 vs. -$0.30
First Horizon National (NYSE: FHN) – Reported -$0.39 vs. -$0.25
General Electric (NYSE: GE) – Reported $0.26 vs. $0.21
Mattel (NYSE: MAT) – Reported -$0.14 vs. -$0.13

Upgrades/Downgrades/Brokerage Research:

Triumph Group (NYSE: TGI) – Downgraded at BAC/Merrill
Sohu.com (Nasdaq: SOHU) – Downgraded at Deutsche Bank
AmerisourceBergen (ABC) – Upgraded at Deutsche Bank
Petsmart (Nasdaq: PETM) – Removed from Buy list at Goldman
Lowe’s (NYSE: LOW) – Added to Buy list at Goldman
Ethan Allen (NYSE: ETH) – Added to Sell list at Goldman
Nokia (NYSE: NOK) – Upgraded at JP Morgan
Regal Entertainment (NYSE: RGC) – Downgraded at Morgan Stanley
Dryships (Nasdaq: DRYS) – Upgraded at Oppenheimer
Dillard’s (NYSE: DDS) – Rating cut at S&P
JC Penney (NYSE: JCP) – Rating cut at S&P
Macy’s (NYSE: M) – Rating cut at S&P
Nordstrom (NYSE: JWN) – Rating cut at S&P
IBM (NYSE: IBM) – Target increased at Thomas Weisel
Parker Hannifin (NYSE: PH) – Upgraded at Wachovia
Illinois Tool (NYSE: ITW) – Downgraded at Wachovia
Borg Warner (NYSE: BWA) – Downgraded at Wachovia

Disclosure: Mr. Moenning and/or related firms hold long positions in: none

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.

You May Also Be Interested In

Create E-mail Alert Related Categories

Contributors

Related Entities

Deutsche Bank, JPMorgan, Citi, Morgan Stanley, Wachovia, Standard & Poor's, Thomas Weisel Partners Group, BB&T Capital Markets, David Moenning, Hedge Funds, Crude Oil, EIM Group

Add Your Comment

Name

Subject

Body

Verification can't see the text?
click here to refresh the image.
what's this?

Follow StreetInsider.com On Twitter