David Moenning's Daily State of the Markets: 06/20

Bulls Looking at the Bright Side

Good morning. At this stage of the game, you certainly have to give the bulls some credit. After all, one could hardly have blamed our heroes in horns if they had taken some well-deserved time off during the recent battle of the bonds. But instead of succumbing to the bears\' arguments that interest rates will matter eventually, the bulls stuck to their guns and somehow managed to push prices right back to their recent highs.

We saw another example of the bulls\' refusal to yield yesterday, albeit on a smaller scale. In short, stocks could have easily sold off on the crummy housing report and the punk earnings report from Best Buy. In looking at the two news items, it would have been easy to make the argument that the consumer is struggling and that both higher rates and higher prices for gasoline will be a problem going forward.

The bears also tried to argue yesterday that there has been a dearth of deals lately and that higher rates may be creating a more risk averse environment for those looking to do a highly leveraged deal.

But instead of focusing on the negative, once again, the bull camp somehow managed to look on the bright side yesterday and pointed to lower bond yields as the primary reason for the cheery disposition. Never mind the fact that oil futures are hovering at 9 month highs. Forget about the idea that higher interest rates will lead to another low in the housing market. And don\'t worry that retailer earnings have been weak lately because the bulls simply smile and keep buying.

So, with some sanity returning to the bond market - yields on the 10-year fell to 5.09% yesterday from 5.14% - perhaps the bulls have a point. As long as interest rates behave, the deals will keep on coming and the consumer is unlikely to crack. And frankly, unless something such has higher inflation or higher interest rates changes the market\'s backdrop, it is probably a good idea to continue to look on the bright side as well.

Turning to this morning, the bulls see a bright and shiny day ahead on the back of big buyback from HD and more good earnings from the brokerage community.

Running through the rest of the pre-game indicators, the foreign markets are higher across the board. Gold futures are moving down this morning by $1.00 to $663.70. In the oil pits, crude futures are moving down $0.30 with the latest quote at $68.80. Interest rates are moving up a smidge this morning with the yield on the 10-year currently trading at 5.09%. And finally, with about an hour before the bell, stock futures in the U.S. are pointing to a higher open. The Dow futures are currently ahead by 50 points; the S&P\'s are about 5 points above board, while the NASDAQ looks to be about 7 points ahead of fair value at the moment.

Stocks "In Play" This Morning:

Today\'s Earnings Before the Bell:

Circuit City (NYSE: CC) - Reported <$0.33> vs. <$0.32>
FedEx (NYSE: FDX) - Reported $1.90 vs. $1.96
Morgan Stanley (NYSE: MS) - Reported $2.45 vs. $2.01

News, Upgrades/Downgrades/Brokerage Research:*

Time Warner Cable (NYSE: TWC) - Upgraded at Bear Stearns
Forward Air (NASDAQ: FWRD) - Upgraded at Bear Stearns
CNOOC (NYSE: CEO) - Upgraded at Credit Suisse
Occidental Petroleum (NYSE: OXY) - Downgraded at Deutsche Bank
Best Buy (NYSE: BBY) - Downgraded at Goldman Sachs
3M (NYSE: MMM) - Estimates increased at JP Morgan
Linear Technology (NASDAQ: LLTC) - Downgraded at Merrill Lynch
Colgate Palmolive (NYSE: CL) - Upgraded at Morgan Stanley
Coca Cola Femsa (NYSE: KOF) - Upgraded at Morgan Stanley
NYSE Euronext (NYSE: NYX) - Upgraded at Morgan Stanley

Mr. Moenning holds Long positions in stocks mentioned: MS, GS, MER

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.

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