Daily State of the Markets 7/21: Any Meaning?

Good morning. I received a handful of emails yesterday afternoon asking first what was behind the big reversal and second if the move had any meaning. Frankly, the first question is relatively easy to answer but the second, well, that's a little tougher.

Coming into Tuesday morning, long positions may have felt like an anchor around the necks of investors as the mood was dour and the open looked like it was going to be ugly. The talk of the town was about the steady stream of revenue misses from the likes of Bank of America (BAC), IBM (IBM), Citi (C), Johnson & Johnson (JNJ) and Goldman Sachs (GS). Investors worried that the lack of expanding revenues may not bode well for the economy going forward.

True to form, the DJIA opened down hard, even harder than the pre-market futures had projected as the venerable index found itself 147 points in the red within 7 minutes of the opening bell. And given the negativity in the air, it felt like a retest of the recent lows was in the cards.

But a funny thing happened on the way to the slaughter. Instead of the HFT boys piling on and making things worse, the dip buyers actually came out of the woodwork and started to nibble. Although it was touch and go for a while, all the talk about the "values" being created by the recent selloff seemed to catch on and before you could remember where you had stashed that Dow 10K hat, the DJIA had bounced off the important line in the sand and was moving higher.

After the requisite stall before lunch, a rumor started making the rounds that the Fed would soon announce it was going to do away with the interest currently being paid on banks' excess reserves sitting at the Federal Reserve. This, while unlikely to occur, would mean that (1) the Fed had enough confidence in both the economy and the banking system to make the move and (2) the banks might need to return to the business of lending money. From there, one thing led to another as the shorts ran for cover, the dip buyers continued to do their thing, and the Dow soon found itself in the green.

Getting back to question number two posed of me yesterday afternoon, I'm not completely convinced that yesterday's joyride to the upside had much meaning. But, my technical analysis friends were quick to remind me that there was a lot of good happening on the charts yesterday. I was told of the "outside day" (which often signifies a change in trend), the key reversal action (ditto), the successful test of support, and the move back above various moving averages (25-, 10-, and 5-day ma's). Thus, the chartists will tell you that the day was indeed meaningful.

For me though, I'm going to ask the market to show me a little something more than one day's worth of fun in the summer sun and will withhold judgment until the S&P can break above 1100 and stay there for a while. Call me skeptical if you must, but a move that comes out of nowhere without any news leaves me less than convinced.

Turning to this morning... we don't have any economic news to review today. However, Apple's (AAPL) earnings after the bell were encouraging and all eyes will be on Mr. Bernanke this afternoon when he presents part one of his two-day semiannual testimony on monetary policy.

Finally, remember that there is more to life than increasing its pace...

Pre-Game Indicators

Here are the important indicators we review each morning before the opening bell...

Major Foreign Markets:
Australia: +0.23%
Shanghai: +0.26%
Hong Kong: +1.10%
Japan: -0.23%
France: +1.84%
Germany: +1.29%
London: +1.70%
Crude Oil Futures: + $0.60 to $78.16
Gold: + $2.50 to $1194.20
Dollar: lower against Yen, Euro and Pound
10-Year Bond Yield: Currently trading higher at 2.95%
Stocks Futures Ahead of Open in U.S. (relative to fair value):
S&P 500: +7.07
Dow Jones Industrial Average: +40
NASDAQ Composite: +15.37
Wall Street Research Summary

Upgrades:

Harley-Davidson (HOG) - Barclays
Devon Energy (DVN) - Barclays
Zions Bancorp (ZION) - Citi
Frontline (FRO) - JPMorgan
General Maritime (GMR) - JPMorgan
Overseas Shipholding (OSG) - JPMorgan
MEMC Electronic Materials (WFR) - Kaufman Bros
Goldman Sachs (GS) - Keefe, Bruyette & Woods
Watson Pharmaceuticals (WPI) - Standard & Poors
Health Care REIT (HCN) - Stifel Nicolaus
State Street (STT) - Stifel Nicolaus

Downgrades:

Stericycle (SRCL) - BofA/Merrill
Gilead Sciences (GILD) - Citi, RBC Capital
Masco (MAS) - Goldman
Ship Finance Intl (SFL) - JPMorgan

Earnings Before The Bell

Company
Symbol
EPS Reuters
Estimate
Abbott Labs ABT $1.01 $1.00
Amphenol APH $0.68 $0.61
Airgas ARG $0.83 $0.72
Check Point Software CHKP $0.58 $0.56
Comerica CMA $0.39 $0.23
Quest Diagnostics DGX $1.07 $1.06
EMC EMC $0.28 $0.27
Eaton Eaton $1.36 $1.17
Freeport McMoRan FCX $1.40 $1.28
Hudson City Bancorp HCBK $0.29 $0.28
Host Hotels & Resorts HST $0.23 $0.23
Coca-Cola KO $1.02 $1.03
Altria MO $0.50 $0.50
Morgan Stanley MS $0.80* $0.48
Northern Trust NTRS $0.82 $0.74
Stanley Black & Decker SWK $1.24 $0.78
Textron TXT $0.29 $0.10
US Bancorp USB $0.40 $0.38
United Technologies UTX $1.20 $1.16
Wells Fargo WFC $0.55 $0.49


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

Long positions in stocks mentioned: none

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.

You May Also Be Interested In

• Heico closes $1.2 billion senior notes offering to repay debt
• BNY prices $500M preferred stock depositary share offering
• Kayne Anderson prices $65M private placement of notes and shares