David Moenning's Daily State of the Markets: 03/07
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Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 0.7%
EPS Growth %: +109.9%
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David Moenning’s Daily State of the Markets:
Have We Seen the Worst?
Good morning. Yesterday’s bounce higher of 157 points was certainly a breath of fresh air after the last week’s miserable performance. The move represented the biggest point gain of the year and erased all of Friday’s losses as well as a good portion of last Thursday’s drubbing.
The advance got started across the pond as a rally in Asian markets quickly spread around the globe. The gains came on the heels of a surprise interest rate cut in Indonesia as well as a pause in the Yen’s rally.
However, at this stage of the game, we need to remember that one up day does not a trend make. It is important to note that the volume totals were unimpressive as yesterday’s rebound was accompanied by lower volume than any of the big down days. Yet, technicians will undoubtedly take note that it was encouraging to see up volume swamp down volume by a measure of 15 to 1 and the breadth statistics were decidedly positive.
Most analysts agree that yesterday’s action does not necessarily represent an end to the corrective phase. The bears know how the game is played and with the bulls having been beaten and bloodied over the past week, the grizzly gang likely stood aside yesterday and let their opponents have their fun.
However, the bulls will argue that the strong rebound is an indication that we’ve seen the lows of the move. The proof, of course, will be in the pudding, which, in this case, will come in the form of a retest of Friday’s lows.
Traditionally, low points tend to be retested within 3 days from a short-term perspective and then again at some point within 3 weeks of the low, which satisfies the intermediate-term perspective. Therefore, traders will be watching these “retest” sessions closely for clues. Besides the obvious question of whether or not prices can remain above the previous low points, they will be looking to volume and breadth statistics as an indication of the veracity of the challenge. In short, if the retest is unenthusiastic and comes on light volume, it provides buyers with a green light going forward.
So, now that we’ve gotten the traditional bounce higher (it is now clear that last Wednesday’s effort was a fake-out) traders will likely return to the economic data and the global news for guidance. While yesterday’s data was overlooked because of the gains in stock prices, it is worth noting that the numbers were a little on the discouraging side. Non-Farm Productivity dipped more than expected and Unit Labor Costs soared far above expectations – which will likely keep the Fed on the sidelines despite all the recent calls for help from stock investors. In fact, Philadelphia Fed President Charles Plosser said yesterday that it is too early to declare victory over inflation.
Turning to this morning, it looks like yesterday’s enthusiasm has quickly worn off as most markets are trading modestly lower so far. Today’s economic data shows that, according to ADP, private sector job creation came in lighter than expected at just 57,000 in February. However, traders seem to be waiting for the big jobs report on Friday as there has been little reaction to the data.
Running through the pre-game indicators, the major overseas markets are mixed with lower prices in Hong Kong and Japan while Europe is hovering around breakeven. Gold futures are trading higher by $2.40 this morning to $648.60 right now. In the oil pits, crude futures are ahead $0.20 this morning and the latest quote is at $60.89. Interest rates are moving down a smidge this morning and the yield on the 10-year is currently trading at 4.53%. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open to the downside. The Dow futures are currently off by about 30 points; the S&P’s are about 4 points underwater, while the NASDAQ looks to be about 6 points below fair value at the moment.
Stocks “In Play” This Morning:
Dell (Nasdaq: DELL) – Mentioned positively in Barron’s
Activision (Nasdaq: ATVI) – Mentioned positively in Barron’s
IBM (NYSE: IBM) – Unveiled partnership with Cisco Systems
Clear Channel Comm (NYSE: CCU) – Upgraded at BofA
Opsware (Nasdaq: OPSW) – Upgraded at BofA
Office Depot (NYSE: ODP) – Upgraded at Deutsche Bank
Cooper Tire & Rubber (NYSE: CTB) – Downgraded at Deutsche Bank
Kellogg (NYSE: K) – Upgraded at Goldman Sachs
Campbell Soup (NYSE: CPB) – Downgraded at Goldman Sachs
Payless Shoe Source (NYSE: PSS) – Upgraded at JP Morgan
Deere & Co (NYSE: DE) – Upgraded at Lehman
Joy Global (Nasdaq: JOYG) – Upgraded at Lehman
Avalon Bay (NYSE: AVB) – Upgraded at RW Baird
Apartment Inv Mgmt (NYSE: AIV) – Upgraded at UBS
Weyerhaeuser (NYSE: WY) – Downgraded at UBS
Google (Nasdaq: GOOG) – Upgraded at UBS
Mr. Moenning holds Long positions in stocks mentioned: GS, ATVI, IBM, DE
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.
Have We Seen the Worst?
Good morning. Yesterday’s bounce higher of 157 points was certainly a breath of fresh air after the last week’s miserable performance. The move represented the biggest point gain of the year and erased all of Friday’s losses as well as a good portion of last Thursday’s drubbing.
The advance got started across the pond as a rally in Asian markets quickly spread around the globe. The gains came on the heels of a surprise interest rate cut in Indonesia as well as a pause in the Yen’s rally.
However, at this stage of the game, we need to remember that one up day does not a trend make. It is important to note that the volume totals were unimpressive as yesterday’s rebound was accompanied by lower volume than any of the big down days. Yet, technicians will undoubtedly take note that it was encouraging to see up volume swamp down volume by a measure of 15 to 1 and the breadth statistics were decidedly positive.
Most analysts agree that yesterday’s action does not necessarily represent an end to the corrective phase. The bears know how the game is played and with the bulls having been beaten and bloodied over the past week, the grizzly gang likely stood aside yesterday and let their opponents have their fun.
However, the bulls will argue that the strong rebound is an indication that we’ve seen the lows of the move. The proof, of course, will be in the pudding, which, in this case, will come in the form of a retest of Friday’s lows.
Traditionally, low points tend to be retested within 3 days from a short-term perspective and then again at some point within 3 weeks of the low, which satisfies the intermediate-term perspective. Therefore, traders will be watching these “retest” sessions closely for clues. Besides the obvious question of whether or not prices can remain above the previous low points, they will be looking to volume and breadth statistics as an indication of the veracity of the challenge. In short, if the retest is unenthusiastic and comes on light volume, it provides buyers with a green light going forward.
So, now that we’ve gotten the traditional bounce higher (it is now clear that last Wednesday’s effort was a fake-out) traders will likely return to the economic data and the global news for guidance. While yesterday’s data was overlooked because of the gains in stock prices, it is worth noting that the numbers were a little on the discouraging side. Non-Farm Productivity dipped more than expected and Unit Labor Costs soared far above expectations – which will likely keep the Fed on the sidelines despite all the recent calls for help from stock investors. In fact, Philadelphia Fed President Charles Plosser said yesterday that it is too early to declare victory over inflation.
Turning to this morning, it looks like yesterday’s enthusiasm has quickly worn off as most markets are trading modestly lower so far. Today’s economic data shows that, according to ADP, private sector job creation came in lighter than expected at just 57,000 in February. However, traders seem to be waiting for the big jobs report on Friday as there has been little reaction to the data.
Running through the pre-game indicators, the major overseas markets are mixed with lower prices in Hong Kong and Japan while Europe is hovering around breakeven. Gold futures are trading higher by $2.40 this morning to $648.60 right now. In the oil pits, crude futures are ahead $0.20 this morning and the latest quote is at $60.89. Interest rates are moving down a smidge this morning and the yield on the 10-year is currently trading at 4.53%. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open to the downside. The Dow futures are currently off by about 30 points; the S&P’s are about 4 points underwater, while the NASDAQ looks to be about 6 points below fair value at the moment.
Stocks “In Play” This Morning:
Dell (Nasdaq: DELL) – Mentioned positively in Barron’s
Activision (Nasdaq: ATVI) – Mentioned positively in Barron’s
IBM (NYSE: IBM) – Unveiled partnership with Cisco Systems
Clear Channel Comm (NYSE: CCU) – Upgraded at BofA
Opsware (Nasdaq: OPSW) – Upgraded at BofA
Office Depot (NYSE: ODP) – Upgraded at Deutsche Bank
Cooper Tire & Rubber (NYSE: CTB) – Downgraded at Deutsche Bank
Kellogg (NYSE: K) – Upgraded at Goldman Sachs
Campbell Soup (NYSE: CPB) – Downgraded at Goldman Sachs
Payless Shoe Source (NYSE: PSS) – Upgraded at JP Morgan
Deere & Co (NYSE: DE) – Upgraded at Lehman
Joy Global (Nasdaq: JOYG) – Upgraded at Lehman
Avalon Bay (NYSE: AVB) – Upgraded at RW Baird
Apartment Inv Mgmt (NYSE: AIV) – Upgraded at UBS
Weyerhaeuser (NYSE: WY) – Downgraded at UBS
Google (Nasdaq: GOOG) – Upgraded at UBS
Mr. Moenning holds Long positions in stocks mentioned: GS, ATVI, IBM, DE
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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