David Moenning's Daily State of the Markets: 05/22

Ready, Set, Sell

Good morning. If ever there was a spot for sell programs to be ready and waiting, the more than 7 year-old high on the S&P 500 was it. Instead of the warm welcome that each new high on the DJIA has received recently, the 1527.35 level on the S&P, which has been a long time coming, brought out some selling yesterday.

The fact that the bears appear to have drawn a line in the sand at the S&P’s old high isn’t exactly surprising. Our furry friends have been flattened by the runaway bull train lately as any attempt to do a little selling have been greeted with open arms by the buyers. As a reminder, the Dow hasn’t been down for even two days in a row since March and you have to go back to February to find a time where the market finished in the red for more than three consecutive sessions.

So, when CNBC’s new orange ticker informed us that the S&P had finally made it back to the old high, which had been set on March 23, 2000, the bears were ready and waiting. Having had no success at getting something going to the downside on bad earnings, weak economic reports, or even a little bump in inflation, the idea of setting up sell programs at the old high was a natural.

And while the assault wasn’t exactly ferocious, the sell programs did manage to spoil the bulls’ fun. The gentle nudge to the downside pushed the Dow ever so slightly into the red yesterday and kept the S&P out of record territory.

So, for one day at least, the bears could wag a paw at their opponents and say, “Not this time!” Never mind the fact that all the major indices except the Dow finished with green screens. And I guess the bears will just ignore the fact that the NASDAQ actually closed at a new six-year high. No, from the bears’ perspective, the key was there weren’t any streamers falling from the ceiling in celebration of the S&P’s return to the Promised Land.

In reality though, it is tough to label yesterday’s session as any kind of victory for the bear camp, morale or otherwise. Sure, it was mildly disappointing that the bulls gave up some early gains and failed to capitalize on some new M&A activity, which has been the lifeblood of the current run. And the fact that the S&P stalled at an important technical level could be an ominous sign if it continues. But for now at least, the bears will take things one day at a time.

Turning to this morning, there is no economic news before the bell. However, we will get a peek at the Richmond Fed Index at 10:00 this morning.

Running through the rest of the pre-game indicators, the major foreign markets are mixed this morning. Gold futures are moving up this morning by $0.10 to $663.90. In the oil pits, crude futures are lower by $0.22 with the latest quote at $66.05. Interest rates are continuing to inch up this morning with the yield on the 10-year currently trading at 4.80%. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open a little higher again. The Dow futures are currently ahead by about 8 points; the S&P’s are about 1 point above board, while the NASDAQ looks to be 3 points better than fair value at the moment

Stocks "In Play" This Morning:

Today’s Earnings Before the Bell:

American Eagle (NYSE: AEO) – Reported $0.35 vs. $0.35
Staples (SPLS) – Reported $0.29 vs. $0.29

News, Upgrades/Downgrades/Brokerage Research:*

Marathon Oil (NYSE: MRO) – Upgraded at AG Edwards
Royal Dutch Shell (NYSE: RDS.A) – Upgraded at AG Edwards
MGM Mirage (NYSE: MGM) – Upgraded at Bear Stearns
Elan (NYSE: ELN) – Upgraded at Citigroup
Raytheon (NYSE: RTN) – Upgraded at Cowen
Red Hat (NYSE: RHT) – Upgraded at Credit Suisse
Lockheed Martin (NYSE: LMT) – Downgraded at Credit Suisse
Aeropostale (NYSE: ARO) – Downgraded at Merrill Lynch
Sandisk (NASDAQ: SNDK) – Downgraded at Merrill Lynch
Shaw Group (NYSE: SGR) – Upgraded at Merrill Lynch
Gilead Sciences (NASDAQ: GILD) – Upgraded at UBS
Archstone Smith (NYSE: ASN) – Upgraded at Wachovia
Apartment Investment & Mgmt (NYSE: AIV) – Upgraded at Wachovia

Mr. Moenning holds Long positions in stocks mentioned: GILD, MRO

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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