David Moenning's Daily State of the Markets: 01/23

Is Pretty Good, Good Enough?

Good morning. It�s pretty clear that just about everything has been going the bulls' way lately. And for those of you that like to keep score of these things, Ned Davis Research tells us that it has now been 131 trading days (which is just shy of 6 months) without a correction of even 2% in the Dow. To put that in perspective, this is the longest such stretch without a correction since 1958. Wow, no wonder the bears are a little cranky!

However, the bulls encountered a bump in the road yesterday that just may put the bears in a better mood. Before you could get to your second cup of coffee on a post playoff Monday morning (Da Bears!), the Dow was staring at a triple digit loss without any major news event to trigger the selling.

Sure, we�ve seen 100 point declines before, but usually there is a catalyst that causes the bulls to stand aside when the shorts go into attack mode. But this time, there was no spike in the price of oil (crude actually fell $0.86 on the day), no bad inflation numbers, nor even a hawkish Fed Governor talking about raising rates again. Nope, this time it seemed to be all about the earnings. The problem is, so far at least, this quarter�s earnings parade has been a little on the underwhelming side.

Usually by the second week of the big parade, Apple has blown us away with stellar numbers and GE has given us confidence that business is still humming along nicely. But right now, all we�ve got is a bunch of pretty good reports. And at this point in the rally, one has to wonder if �pretty good� is going to be good enough to keep our furry friends caged up.

In reality, a corrective phase would be welcomed by both teams about now. Everybody knows that things are getting a little (more like a lot) extended and that a scary pullback just might be what the doctor ordered. A decline would give buyers a chance to do something besides chase stocks higher. So, even the bulls would welcome a little nastiness to even things out a bit. And because of this, we probably should expect any pullback to last more than a couple hours.

Turning to this morning, we don�t have any economic data to review before the bell. However, we will get the December reading of the Index of Leading Economic Indicators at 10:00 this morning (it was pushed back until today due to technical difficulties yesterday) along with the Richmond Fed Index.

Running through the rest of the pre-game indicators, the foreign markets were mostly lower overnight. Gold futures are a higher this morning with the last trade up $5.20 to $639.30. In the oil pits, crude futures are moving up a little so far with the latest quote showing the February contract up $0.86 to $53.43. Interest rates are little changed this morning with the 10-year is currently trading with a yield of 4.75%. And finally, with a little more than an hour before the bell, stock futures in the U.S. are looking flat. The Dow futures are currently down by just a couple points; the S&P�s are about even, while the NASDAQ looks to be about 2 points below fair value at the moment.

Stocks �In Play� This Morning:

Bank of America (BAC) � Reported $1.19 vs. $1.18
Burlington Northern (BNI) � Reported $1.42 vs. $1.40
Coach (COH) � Reported $0.61 vs. $0.58
DuPont (DD) � Reported $0.45 vs. $0.45
EMC Corp (EMC) � Reported $0.17 vs. $0.16
Johnson & Johnson (JNJ) � Reported $0.81 vs. $0.79
Texas Instruments (TXN) � Reported $0.39 vs. $0.38, Upgraded at Merrill Lynch
UAL Corp (UAUA) � Reported <$0.55> vs. <$0.42>
United Technologies (UTX) � Reported $0.87 vs. $0.85
Pfizer (PFE) � Downgraded at AG Edwards
Under Armor (UA) � Upgraded at Credit Suisse
Urban Outfitters (URBN) � Upgraded at Friedman Billings
DR Horton (DHI) � Upgraded at Goldman Sachs
Toll Brothers (TOL) � Upgraded at Goldman Sachs
Cardinal Health (CAH) � Upgraded at JMP Securities
Intuit (INTU) � Upgraded at JP Morgan
Nasdaq Stock Mkt (NDAQ) � Downgraded at Morgan Stanley
Motorola (MOT) � Downgraded at Morgan Stanley
SAP (SAP) � Upgraded at Morgan Stanley

Disclosure: Long positions is stocks mentioned: BSC, MS, CSCO, BA

Note: All earnings reports compared to Reuters 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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