Contributors

Good morning. Yes, it is true that the stocks appear to be picking up where they left off before the market mugging in Dubai. Yes, it is true that the indices got the final month of the year started off on the right foot with a triple-digit gain yesterday. And yes, it is true that it was economic data both here and overseas that put the bounce back in the bulls’ step on Tuesday.

However, our furry friends are quick to point out that after yesterday’s fun, the S&P 500 is once again right back where it stood on November 16th, 17th, 18th, 23rd, 24th, and 25th. And this, dear readers, is a splendid example of something chart technicians call ‘resistance.’ What’s more, unless the bulls can find a way to “break on through to the other side” in the very near future, the bears contend that the line in the sand the bulls currently face will quickly turn into something more on the order of the Berlin Wall.

While I don’t want to spend too much time this morning on what CNBC has dubbed ‘chartology,’ the glass-is-half-empty crowd has also been crowing a lot lately about the change in leadership, the negative divergences, and the overall decline in volume seen lately. And although all of the problems noted above could be easily rectified with a rip-roaring move to the upside accompanied by solid breadth and volume, we need to soberly recognize that the ‘issues’ presently being pointed to by the bear camp are usually present at important market tops.

Before you start throwing things or hurling insults at the very suggestion that this record breaking run for the roses might come to an end at some point, please allow me to clarify my point. We do not want to imply that the bulls are done and I can confirm that no one in our office has been seen printing up “the end is near” signs. No, we recognize that market moves usually go much farther than imaginable and in short, we fully expect this bull run to continue to impress – especially if the economy can perk up a bit and maybe produce a couple new jobs along the way.

However, we have also been around long enough to know what the telltale signs of trouble are. So, if you are looking for reasons to be worried, check out a chart of Goldman Sachs (GS), GE (GE), Bank of America (BAC), and the Russell 2000. All of the above were poster-children for the rebound that began on March 10th and all have been noticeably absent during the latest move the upside. Add to that the less than robust readings from some of our momentum models, and well, let’s just say that we’ll be watching things rather closely as the year draws to a close.

Before we got sidetracked, we mentioned that yesterday’s romp to the upside was sponsored by some solid economic data. And as has been the case throughout much of this year’s rally, the manufacturing data both here at home and in China was a key driver. Overnight we learned that China’s manufacturing sector expanded for the ninth straight month. And then the U.S. PMI confirmed a fourth straight month of growth in the sector. Add to that a sigh of relief over Dubai, improving overseas markets, and much better-than-expected report on Pending Home Sales and you have a recipe for success.

But, of course, the key question from here is if the bulls will stay stuck in the mud below resistance or find a way to break on through to the other side?

Turning to this morning, ADP reported that the private sector lost 169,000 jobs in November, which was 19K more than the consensus estimate for 150K. However, ADP notes that the trend continues to improve as November was the 8th straight month in which job losses were less than the month prior.

Running through the rest of the pre-game indicators, Asian markets were higher while European bourses are hovering around breakeven. Crude futures are lower with the latest quote showing oil trading down by $0.41 to $77.96. On the interest rate front, we’ve got the yield on the 10-yr trading at 3.30%, while the yield on the 3-month T-Bill is currently at 0.05%. In addition, gold is up another $12.20 and the dollar is weaker against the Yen, Euro, and Pound. 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 off by about 8 points; the S&P’s are down a fraction, while the NASDAQ looks to be about within a point of fair value at the moment.

Wall Street Research Summary

Upgrades:
# Sysco (SYY) – BB&T Capital Markets
# SunTrust Banks (STI) – Credit Suisse
# BB&T Corp (BBT) – Credit Suisse
# KB Home (KBH) – Credit Suisse
# MDC Holdings (MDC) – Credit Suisse
# Express Scripts (ESRX) – JP Morgan
# AMR Corp (AMR) – Morgan Stanley
# UAL Corp (UAUA) – Morgan Stanley
# Morgan Stanley (MS) – Estimates reduced at UBS
# JP Morgan (JPM) – Estimates reduced at UBS
# Citi (C) – Estimates reduced at UBS
# RF Micro Devices (RFMD) – USB

Downgrades:
# Mechel Steel (MTL) – Credit Suisse
# Constellation Brands (STZ) – Goldman
# Alaska Air (ALK) – Morgan Stanley

Long positions in stocks mentioned: ESRX, ALK

Best wishes for a pleasant day and until next time, “may the bulls be with you!”

David D. Moenning
Founder TopStockPortfolios.com

For more "top stock" portfolios and research, visit www.TopStockPortfolios.com

The opinions and forecasts expressed are those of David Moenning, founder of TopStockPortfolios.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. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of TopStockPortfolios and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Stocks should always consult an investment professional before making any investment.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

The information contained in our websites and TopStockPortfolios publications is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer.

Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.

From Notable Calls:

Morgan Stanley is out upgrading the Airline sector to Attractive, upgrading AMR Corp (NYSE: AMR) and Ual Corp. (NASDAQ: UAUA) to Overweight from Equal-Weight.

Upgrading Industry View to Attractive on improving risk/reward of the airline “cycle call.” Morgan Stanley notes they have updated their estimates and liquidity projections for 2010 to account for recent trends/news events. Additionally, they are moving their valuation levels to YE10 from YE09 and raising base case valuations across all airlines.

Importantly, the firm expects investors’ liquidity concerns to dissipate in the coming months as investors incorporate the full implications of US Airways’ (NYSE: LCC) recent liquidity improvements. Now that 1) previously exuberant expectations have normalized as evidenced by price action in the last 1-2 months vs. improving trends and 2) the risk of a liquidity squeeze at a major carrier in 2010 has fallen; firm believes investors will become increasingly willing to bet on the cycle.

Unlikely to get a markedly better entry point in the coming months. Though they believed that airline profitability is improving, they were reluctant to make the “airline cycle call” ahead of 3Q09 earnings like many of their sell-side peers on the belief that investors would be able to get a significantly better entry-point near-term. Since the firm reiterated their In-line Industry View (see Staying on the Sidelines for Now 11/2/09), many of the five indicators they noted they were watching to become more constructive on the space have turned more favorable. Moreover, Morgan Stanley also believes that they are on the cusp of a stream of positive catalysts for the group that will showcase substantial 2nd derivative improvement in revenue and only subsequently will they see evidence of the anemic rebound that has concerned us. Therefore, they believe investors will be hard-pressed to identify a better entry-point for the cycle call in the coming months.

Re-orienting Airline Ratings. Consistent with Morgan Stanley's evolving industry view, they are adding risk to their recommendations. As such, they are upgrading both AMR and UAUA from EW to OW and downgrading shares of (Nasdaq: ALGT) (OW to EW) and (NYSE: ALK) (EW to UW).

Upgrading AMR to OW from EW. AMR's recent liquidity-enhancing transactions have placed the company more firmly in the "Survivor" basket, particularly considering industry trends are broadly improving. Though their projected headline EPS losses and difficult union negotiations are risks, the firm believes investor willingness to bet on the cycle using this highly leveraged airline equity is likely to overcome these marginal negatives.

Why Now? As a carrier formerly not included in firm's “Survivor Basket”, AMR is still perceived to have more liquidity risk than they think is appropriate. Furthermore, we believe that the industry is on the cusp of a multi-month series of positive catalysts. Given AMR’s leverage to the cycle, they believe this is a setup for a likely move higher.

UAL Corp. (UAUA, OW) Upgrading UAUA to OW from EW. UAUA’s leverage to the industry revenue cycle and underperformance through the downturn is likely to become a relative positive as investors focus on rapidly improving YoY revenue trends over the coming quarters. Furthermore, recent liquidity injections are likely to improve investor willingness to look through the cycle into 2011, when the company generates significant FCF per MSCO's estimates.

Why Now? Similar to AMR, but with even more leverage and suffering from more negative sentiment with respect to liquidity, in firm's view; UAUA is likely to move higher as investors focused on the airlines with the most leverage to the cycle in the face of positive catalysts.

Notablecalls: AMR and UAUA - 5-7% movers today for sure. Maybe even more. Note Goldman Sachs was positive on Airlines yesterday and the stocks have been pushing higher.

Getting a bump from Morgan Stanley is exactly what the doctor ordered for these to take off again.

AMR can trade to $6.75+

UAUA can trade to $8.75+

Let's see how it works out.

For more calls go to http://notablecalls.blogspot.com/

Good morning. While it is tempting to work this morning’s missive around the title of one of the greatest rock albums of my generation – especially since the NFL announced Thursday that Pete Townshend and Roger Daltrey’s little band will be the halftime entertainment at this year’s Super Bowl in Miami on February 7th – we’re actually referring to the big question in the market right now. As in: Who’s next in terms of debt defaults?

If there is such a thing, the Vegas line likely favors the Ukraine at the present time as prior to the Dubai mess, we had been hearing a great deal of talk about a sovereign debt default there. But then again, although the game of “who’s next?” can be fun, we should probably avoid borrowing trouble in this department and stick to the matter at hand: Dubai’s $59 billion debt.

To review briefly, two quasi state-owned companies (Dubai World and Nakheel) from Dubai created somewhat of a global panic last week after they announced Wednesday that they were seeking a six-month time-out on their debt payments.

Based on the concept of “build it and they will come,” Dubai’s rapid growth revolved around the ruler Sheikh Mohammed bin Rashid al-Maktoum, who outlined his big ideas in his book, "My Vision." The book suggested that other Arab countries could replicate Dubai's big success by quickly building big shining cities in the desert through the import of foreign residents, finance and labor. But instead of a big idea whose time had come to the middle east, now the big bet on a big city based on big debt seems to be a big problem .

Stocks around the globe initially dove hard in response to the news. However, after European bourses staged a turnaround on Friday, the losses in the U.S. were a fraction of those seen in Asia, and the WSJ suggested that the panic was overdone, the situation appears to have calmed down a bit.

The bulls will argue that this is not Lehman Brothers revisited and that the problem is localized to Dubai. However, on the other side of the aisle, our friends in fur contend that this is a contagion waiting to happen and there is no telling who’s next in this game.

The good news is Asian markets advanced on Monday after the U.A.E. central bank said Sunday that it had provided additional liquidity facility to banks in the region and announced that it “stands behind” the banks in Dubai. The bad news is there are reports this morning that the Dubai government will not guarantee Dubai World’s debt and a top Dubai official stated creditors will be affected in the short term by the firm’s restructuring.

So, will the markets here at home play “who’s next?” today or brush the problem aside and focus more on the state of the shopping season and the economy. Don’t forget, we’ve got the November Jobs report on Friday and there seem to be minute-to-minute updates on what shoppers are doing. On the shopping front, the bottom line is retailers appear to be seeing mixed results so far as more shoppers hit the stores over the Black Friday weekend but apparently spent a little less.

Turning to this morning, we do not have any economic data due to be released before the bell but we will get reports on the Chicago and Milwaukee PMI at 9:45 and 10:00 am respectively.

Running through the rest of the pre-game indicators, the foreign markets are mixed by region with Asia up nicely while the major European Bourses are not as enthusiastic with France off -0.54%, Germany down -0.85%, and London’s FTSE up +0.28%. Crude futures are basically unchanged with the latest quote showing oil trading up by $0.03 to $76.08. On the interest rate front, we’ve got the yield on the 10-yr trading at 3.24%, while the yield on the 3-month T-Bill is currently at 0.04%. In addition, gold is down $1.50 and the dollar is weaker against the Yen and Pound. Finally, with about 60 minutes before the bell, stock futures in the U.S. are pointing to a modestly higher open. The Dow futures are currently head by about 15 points; the S&P’s are up about 2 points, while the NASDAQ looks to be about a single point below fair value at the moment.

Wall Street Research Summary

Upgrades:
# HSBC Holdings (HBC) – BofA/Merrill
# Procter & Gamble (PG) – Mentioned positively at Bernstein
# Genzyme (GENZ) – Citi
# AFLAC (AFL) – Credit Suisse
# Abercrombie & Fitch (ANF) – FBR Capital
# Sonic (SONC) – Removed from Conviction Sell list at Goldman
# Banco Bradesco (BBD) - Goldman
# U.S. Steel (X) – Added to Conviction Buy list at Goldman
# Deere & Company (DE) – JP Morgan
# Safeway (SWY) – Morgan Stanley
# Stryker (SYK) – RBC Capital
# US Bancorp (USB) – RW Baird
# DuPont (DD) – Added to Global Top 40 at UBS
# Barrick Gold (ABX) – Added to Global Top 40 at UBS
# Wal-Mart (WMT) – Added to Global Top 40 at UBS
# Microsoft (MSFT) – Added to Global Top 40 at UBS
# Teva Pharmaceuticals (TEVA) – Added to Global Top 40 at UBS

Downgrades:
# Baidu (BIDU) – Bernstein
# Freeport-McMoRan (FCX) – Removed from Conviction Buy list at Goldman
# Supervalu (SVU) – Morgan Stanley
# Franklin Resources (BEN) – Pali Research
# Bristol-Meyers (BMY) – Removed from Global Top 40 at UBS

Long positions in stocks mentioned: GS, MSFT

Be sure to keep everything in perspective and until next time, “may the bulls be with you!”

David D. Moenning
Founder TopStockPortfolios.com

For more "top stock" portfolios and research, visit TopStockPortfolios.com

The opinions and forecasts expressed are those of David Moenning, founder of TopStockPortfolios.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. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of TopStockPortfolios and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Stocks should always consult an investment professional before making any investment.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

The information contained in our websites and TopStockPortfolios publications is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer.

Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.

Good morning. The day after Thanksgiving is supposed to be an exceptionally quiet session where volume is almost nonexistent and everybody goes home early wondering why they bothered to show up. However, after the events in Dubai on Wednesday and the carnage seen in the foreign markets on Thursday, this Black Friday may contain some fireworks.

In case you didn’t spend your Thanksgiving checking in on the markets around the globe, European and Asian markets got smoked on Thursday with London’s FTSE 100 dropping -2.4%, Germany’s DAX falling -2.25%, Hong Kong’s Hang Seng losing -1.8%, and the Shanghai Composite diving -3.6%. And while European markets are regaining their footing this morning, the Asian markets are once again a sea of red with Australia down -2.8%, Shanghai -2.4%, Hong Kong -4.8%, and Japan -3.2%. Thus, it will suffice to say that the U.S. market might have some catching up to do this morning.

The source of the problem has to do with Dubai’s state-owned investment company, Dubai World, which is seeking to delay upcoming debt payments on $60 billion in debt until May. This has created concerns about what will amount to a sovereign debt default and the ripple effect it could cause.

Dubai, whose extravagant real estate projects have been largely on hold since the financial crisis began, said late Wednesday that it would ask creditors at its flagship firms Dubai World and Nakheel to delay repayment on billions of dollars in debt. In short, it isn’t very difficult to connect the dots on this one. Word that two of Dubai’s flagship firms will default on billions of dollars of debt has renewed concerns about the health of the global financial system; a system that, at the present time, is viewed as improving, but still fragile.

After the tank-job seen in global markets on Thursday, analysts are busy trying to decide if this situation represents a country-specific problem or will pose systemic risk to the global banking system.

For example, Societe Generale sent a note to clients saying, "Anybody who thought the exit profile for markets from the great recession and the great financial crisis was going to be a smooth one was kidding themselves."

And a European Central Bank Governing Council member wrote, "The events in Dubai in recent days are one of the hiccups if you like, one of the difficulties, which affirms that we were right to highlight the uncertainty ahead of us and that the road ahead could be a bumpy one."

As banks around the globe are busy counting up their exposure to the Dubai debt, it is important to keep in mind the scope of this particular problem. Dubai World reportedly has $59 billion in liabilities, which is the vast majority of Dubai’s total debt of $80 billion. And while this number is nothing to sneeze at, it is a drop in the bucket compared to the $2.8 Trillion in writedowns the IMF estimates that U.S. and European banks will ultimately have to take in response to the credit crisis through 2010.

However, the Dubai crisis quickly reminds traders of the bad old days seen just 8 months ago and provides anybody looking to lock in profits before year end with an opportunity to do so.

In addition, we would be remiss if we didn’t point out the talk of central bank intervention on behalf of the U.S. dollar this morning. It turns out that Japan’s Finance Minister said he was “extremely nervous” about the dollar/yen relationship as he said the “market had moved too far in one direction.” And then the Swiss National Bank reportedly intervened to by U.S. dollars in order to prevent any further export-sapping appreciation of the Swiss Franc. So, while Dubai is getting all the attention, don’t lose sight of the dollar-carry trade in all of this.

Turning to this morning, it’s a half day on Wall Street with the market’s closing at 1:00 pm eastern. There are no earnings reports that have been released, no economic releases on tap, and next-to no research updates from Wall Street firms this morning.

Running through the rest of the pre-game indicators, the foreign markets are now mixed by region with Asia playing follow-the-leader to the downside while the major European Bourses have turned higher on the day with France up +0.76%, Germany up +0.49%, and London’s FTSE up +0.44%. Crude futures are lower with the latest quote showing oil trading down by $3.42 to $74.54. On the interest rate front, we’ve got the yield on the 10-yr trading at 3.21%, while the yield on the 3-month T-Bill is currently at 0.03%. In addition, gold is down $25.10 and the dollar is rising a bit. Finally, with about 60 minutes before the bell, stock futures in the U.S. are pointing to a very weak open. The Dow futures are currently off by about 200 points; the S&P’s are down about 25 points, while the NASDAQ looks to be about 40 points below fair value at the moment.

Be sure to take time to breathe and until next time, “may the bulls be with you!”

David D. Moenning
Founder TopStockPortfolios.com

For more "top stock" portfolios and research, visit www.TopStockPortfolios.com


The opinions and forecasts expressed are those of David Moenning, founder of TopStockPortfolios.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. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of TopStockPortfolios and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Stocks should always consult an investment professional before making any investment.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

The information contained in our websites and TopStockPortfolios publications is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer.

Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.

Good morning. The bulls enjoyed a solid advance to start the week, but the bottom line is the end result wasn't nearly as positive as it could have been. While the indices all finished with gains of at least 1.25% (the Russell popped +1.7%), the rally stopped short of new-cycle high territory for all the indices save the Dow.

Although the Dow managed to break on through to the other side to new-high ground for this cycle yesterday, the S&P and NASDAQ appeared to bump their heads on important resistance zones. Thus, the question of the day becomes: Will the rest of the indices play follow the leader or is the Dow setting us up once again for the dreaded "breakout fakeout?"

The session got started off on the right note on the back of some reassuring Fedspeak and the corresponding negative response by the dollar (yes, the inverse relationship between stocks and the greenback is still in play). First, in a speech in New York over the weekend, St. Louis Fed President James Bullard said that the Fed should consider extending its quantitative easing program (the direct purchase of bonds and debt securities by the Fed) in an effort to give the Fed flexibility to ward off any potential future weakness in the economy. And then, Chicago Fed President Evans told the Financial Times that the FOMC may not start raising rates until “late 2010, perhaps later in terms of 2011.”

The bulls also got a little help from the economic data. After a string of disappointing headlines on the economic front last week, the housing recovery theme got a shot in the arm from yesterday’s report on Existing Home Sales. Sales in October jumped up 10.1% to an annualized rate of 6.1M units, which was the best since February 2007 and also well above the consensus estimates. It was also positive that inventories pulled back a bit as the number of months of supply on the market fell to 7 from 8 in September.

In addition to the reassuring Fedspeak, dollar bears/stock bulls were also treated to a large auction of 2-year notes yesterday. While the auction seemed to go reasonably well, the fact that the government is planning to sell a record $118 Billion in notes this week is likely to keep any rally in the dollar under wraps for a while longer.

However, just about the time the bulls seemed to be readying a rousing rendition of Happy Days are Here Again, Standard & Poors stepped in and spoiled the fun. Although the report didn’t get much press, the rally stalled out the moment S&P released a report saying that according to their new metric of Risk Adjusted Capital, most banks in the U.S. are undercapitalized given the current environment.

So, will the rest of the indices follow the Dow's lead? Frankly, with the holiday-shortened week upon us, it is hard to tell. But from a technical standpoint, this is the most important part of the game at the present time.

Turning to this morning, the Government is out with its second stab at U.S. GDP for the third quarter. The report shows GDP rose by 2.8% during the July through September period, which was in line with the consensus estimate for a reading of 2.8%, but below the first read of 3.5%. Next up, Personal Consumption (a measure of consumer activity) was reported up 2.9% during the quarter; well below the consensus for 3.2% and the first read of 3.4%. The GDP Price Index, which is a measure of price inflation, came in at +0.5%; below the consensus expectations for +0.8%. And finally, the Core PCE (Personal Consumption Expenditures) increased by +1.3%; below the consensus for 1.4%.

Running through the rest of the pre-game indicators, with the exception of London, the foreign markets are lower across the board. Crude futures are lower with the latest quote showing oil trading down by $0.21 to $77.35. On the interest rate front, we’ve got the yield on the 10-yr trading at 3.33%, while the yield on the 3-month T-Bill is currently at 0.04%. In addition, gold is up $2.90 and the dollar is lower against the Yen and Pound but fractionally higher against the Euro. Finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a slightly lower open. The Dow futures are currently off by about 19 points; the S&P’s are down less than a point, while the NASDAQ looks to be about 5 points below fair value at the moment.

Yesterday's Earnings After The Bell

Analog Devices ADI $0.36 $0.26
Atwood Oceanics ATW $0.75 $0.68
Brocade BRCD $0.15 $0.13
Hewlett-Packard HPQ $1.14 $1.13
Nuance Comm NUAN $0.32 $0.29

Earnings Before The Bell

American Eagle AEO $0.21 $0.21
Barnes & Noble BKS -$0.30 -$0.28
Cracker Barrel CBRL $0.78 $0.62
Dollar Tree DLTR $0.76 $0.66
DSW Inc DSW $0.60 $0.46
Heinz HNZ $0.76 $0.69
Hormel Foods HRL $0.77 $0.68
Medtronic MDT $0.77 $0.77
Warner Music WMG -$0.03 $0.04
Zale ZLC -$1.80 -$2.02

Wall Street Research Summary

Upgrades:
Hertz Global (HTZ) – Argus Research
National Semiconductor (NSM) – Added to Top Picks Live at Citi
Eastman Chemical (EMN) – Deutsche Bank
DR Horton (DHI) – Mentioned positively at Goldman
Cephalon (CEPH) – Jefferies
General Electric (GE) – Mentioned positively at JP Morgan
Acuity Brands (AYI) – Oppenheimer
Tellabs (TLAB) – Soleil Securities
Adobe Systems (ADBE) – Mentioned positively at UBS
Wal-Mart (WMT) – Estimates and target increased at UBS
Reliance Steel (RS) – UBS
Prudential Financial (PRU) – Wells Fargo

Downgrades:
Interpublic (IPG) – Argus Research
Zions Bancorp (ZION) – Mentioned cautiously at Citi
Illumina (ILMN) – Target reduced at Goldman
Ciena (CIEN) – Jefferies
Union Pacific (UNP) – UBS

Long positions in stocks mentioned: none

* Report includes items that make comparisons to the consensus estimate questionable

Try doing something nice for someone today (for no reason at all) and until next time, “may the bulls be with you!”

David D. Moenning
Founder TopStockPortfolios.com

For more "top stock" portfolios and research, visit www.TopStockPortfolios.com

The opinions and forecasts expressed are those of David Moenning, founder of TopStockPortfolios.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. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of TopStockPortfolios and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Stocks should always consult an investment professional before making any investment.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

The information contained in our websites and TopStockPortfolios publications is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer.

Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.