David Moenning's Daily State of the Markets: 4/9

April 9, 2008 9:58 AM EDT

All Dressed Up, But…

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

Both teams are of the mind right now that stocks are set up to make a move in their direction. The bulls argue that all the bad news is out and therefore, it is only a matter of time before prices break out of the three-month old trading range to the upside. Yet at the same time, the bears point to signs of recession and weakening consumer attitudes as evidence that there isn’t a chance in heck that stocks are going anywhere but back down.

While both sides are fairly confident in their views, the end result of the last five trading days has been zilch. After last Tuesday’s 400 point blast, the major indices have basically laid there and done next to nothing. Thus, until there is some sort of a trigger, it would appear that both teams are all dressed up with no place to go.

Stocks started off to the downside yesterday right out of the gate on profit warnings from Advanced Micro (AMD) and Novellus (NVLS). This on top of a really crummy report from Alcoa and a reminder from Washington Mutual that we have yet to see the bottom line of the subprime writedowns gave the bears the impression that we were indeed set up for a no-brainer shorting opportunity.

Then, when the minutes of the recent Fed meeting showed that the FOMC members might be more worried than they had originally let on, even yours truly was ready to jump on the bear band wagon with some SDS (Ultra Short S&P 500) as a hedge against another trip down through the trading range. In all honesty, the fact that the Fed expressed concerned about “a prolonged and severe economic downturn� as well as something termed an “adverse feedback loop� relating to the financial markets should have given the bears all the ammunition they needed to get a downside party started.

However, a funny thing happened on the way to the wipeout as it just didn’t happen. Sure, there was a little selling pressure and the Dow did dive just before lunch. But at the end of the day, a drop of 36 points was hardly something that either team could get excited about.

So, although the market continues to look like it is set up for a move in both directions, so far at least, there has been no trigger to get things moving. But with Fed speakers on tap today and the earnings parade set to start rolling next week, we probably won’t have to wait too long for the show to begin.

Turning to this morning, it is a positive that Citigroup (C) has been able to unload $12 billion of leveraged loans and word has it that the Fed is considering additional options to help thaw the lending markets. But in keeping with the but-on-the-other-hand environment, the pricing of the Citigroup sale isn’t exactly encouraging and the fact that the Fed has to continue to think outside the box is a little disconcerting.

Running through the rest of the pre-game indicators; the foreign markets were split by region with Asia down and Europe up slightly. Crude futures are moving down a hair with the latest quote showing oil lower by $0.08 to $108.42. Interest rates are moving down a tick with the 10-yr trading at a yield of 3.55% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are pointing to a flat-to-down open. The Dow futures are currently off by about 20 points; the S&P’s are about even, while the NASDAQ looks to be about a point above fair value at the moment.

Stocks “In Play� This Morning:

Today’s Earnings Before the Bell:

Circuit City (NYSE: CC) – Reported $0.10 vs. ($0.08)

News, Upgrades/Downgrades/Brokerage Research:

Procter & Gamble (NYSE: PG) – Downgraded at Goldman

Kimberly Clark (NYSE: KMB) – Downgraded at Goldman

Arch Coal (NYSE: ACI) – Downgraded at HSBC

Canadian Natural Resources (NYSE: CNQ) – Upgraded at Lehman

Range Resources (NYSE: RRC) – Downgraded at Morgan Stanley

Coca Cola (NYSE: KO) – Target increased at Morgan Stanley

Coca Cola Enterprises (NYSE: CCE) – Estimates reduced at Morgan Stanley

ITT Educational Services (NYSE: ESI) – Downgraded at Piper Jaffray

Corinthian Colleges (Nasdaq: COCO) – Downgraded at Piper Jaffray

Bed Bath & Beyond (Nasdaq: BBBY) – Downgraded at Piper Jaffray

Estee Lauder (NYSE: EL) – Downgraded at Piper Jaffray

Urban Outfitters (Nasdaq: URBN) – Downgraded at Piper Jaffray

Intel (Nasdaq: INTC) – Estimates reduced at UBS

Mr. Moenning holds Long positions in stocks mentioned: KO

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: DMoenning@HeritageCapitalManagement.com

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• Piper Jaffray
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• Federal Open Market Committee

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