David Moenning's Daily State of the Markets: 09/27
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Confidence Restored?
Good morning. With the Dow Jones Industrial Average finishing at its second best level of all time and at a new high for the year and the S&P 500 closing at its highest point in five and one-half years, the recent resumption of optimism in the bull camp is understandable. And as is generally the case, it was emotion that was primarily responsible for yesterday�s second straight day of higher prices.
Optimism seemed to uptick on several fronts yesterday, which led to an overall improvement in the market and the economic outlook. First, the Conference Board reported that Consumer Confidence came in better than expected. The report basically confirmed the rebound in consumer attitudes as the index came in above the consensus and August�s number was also revised higher. It is now obvious that the public�s confidence is directly tied to the price of oil and with oil now 20% lower than the peak in mid-July, consumers are feeling better about things.
Next, the Richmond Fed Index seemed to contradict the weakness that last week�s Philly Fed had projected. The manufacturing index for the region came in at a reading of 9 which is much improved from August�s reading of just 3 points.
And finally, traders seemed to really grab onto yesterday�s resumption in oil�s slide. Crude�s drop of -$0.44 to $61.01 was actually a bit surprising in light of comments coming out of OPEC suggesting that the cartel may decide to try and �stabilize� the price of crude (insert eye roll here). In any event, it was the weakness in oil prices that appeared to be directly correlated to the rally in stocks. So, with lower oil came higher stocks.
From a technical standpoint, the chart-watchers have to be very excited about the action in the Dow and S&P as both broke out to new highs for the year on improved volume. However, while the large-cap indices are enjoying the ride, the former leaders, the small and mid-cap indices continue to struggle with a trading range that is now almost four months old.
So with the Dow now just 53 points away from the Promised Land, you can bet that the bulls have their sights set on the 11,722 level. However, the question that begs to be asked is: What will happen once we get there?
Turning to this morning, we�ve got some new economic data to review in the form of the Durable Goods report for August. The report tends to be on the volatile side and this one was no exception as total orders fell by -0.5% which was a far cry from the expectations for an increase of +0.5%. The ex-transportation number also was a surprise and showed a drop of -2%, while the important Nondefense Capital Goods Ex-Transportation number, which is a proxy for business investment, showed a drop as well, losing -0.3% for the month.
Stocks futures have weakened a bit on the news while bond prices have rallied. While, the Durable Goods report is extremely volatile and we probably shouldn�t jump to conclusions, it will be interesting to see if the trend of bad news being good news has now ended.
Running through the pre-game indicators, overseas markets are higher across the board. Gold futures are moving up this morning and are quoted at $601.70 right now. Crude oil futures are rebounding on more chatter out of OPEC and are currently up $0.61 at $61.67. Interest rates are moving lower this morning with the 2-year currently quoted at 4.65% while the 10-yr is trading with a yield of 4.55% right now. And finally, with about an hour before the bell, stock futures in the U.S. are slightly lower. The Dow futures are currently off by 15, the S&Ps are down about a point, and the NASDAQ is sporting a fractional decline at the moment.
Stocks �In Play� This Morning:
Advanced Micro Devices (AMD) � Mentioned positively at BofA
Valero (VLO) � Upgraded at BofA and Citigroup
Tesoro (TSO) � Upgraded at BofA
Sunoco (SUN) � Upgraded at Citigroup
Marathon Oil (MRO) � Upgraded at Citigroup
Millennium Pharmaceuticals (MLNM) � Mentioned negatively at BofA
Tivo (TIVO) - Mentioned positively at Citigroup
XTO Energy (XTO) � Added to focus list at Credit Suisse
Norsk Hydro (NHY) � Upgraded at Credit Suisse
Red Hat (RHAT) � Downgraded at 1st Albany, Prudential, Target reduced at Goldman
Global Crossing (GLBC) � Added to Buy List at Goldman Sachs
E-Trade (ET) � Goldman Sachs reduces estimates for discount brokers
MetLife (MET) � Removed from Focus List at JP Morgan
Gap (GPS) � Upgraded at Morgan Stanley
Applied Materials (AMAT) � Mentioned positively as part of semi-equipment note
Reynolds American (RAI) � Upgraded at UBS
Newmont Mining (NEM) � Reduces sales guidance for gold
Long positions in stocks mentioned: XTO, ET, AMAT, RAI
** 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.
www.TopGunsTrading.com
Good morning. With the Dow Jones Industrial Average finishing at its second best level of all time and at a new high for the year and the S&P 500 closing at its highest point in five and one-half years, the recent resumption of optimism in the bull camp is understandable. And as is generally the case, it was emotion that was primarily responsible for yesterday�s second straight day of higher prices.
Optimism seemed to uptick on several fronts yesterday, which led to an overall improvement in the market and the economic outlook. First, the Conference Board reported that Consumer Confidence came in better than expected. The report basically confirmed the rebound in consumer attitudes as the index came in above the consensus and August�s number was also revised higher. It is now obvious that the public�s confidence is directly tied to the price of oil and with oil now 20% lower than the peak in mid-July, consumers are feeling better about things.
Next, the Richmond Fed Index seemed to contradict the weakness that last week�s Philly Fed had projected. The manufacturing index for the region came in at a reading of 9 which is much improved from August�s reading of just 3 points.
And finally, traders seemed to really grab onto yesterday�s resumption in oil�s slide. Crude�s drop of -$0.44 to $61.01 was actually a bit surprising in light of comments coming out of OPEC suggesting that the cartel may decide to try and �stabilize� the price of crude (insert eye roll here). In any event, it was the weakness in oil prices that appeared to be directly correlated to the rally in stocks. So, with lower oil came higher stocks.
From a technical standpoint, the chart-watchers have to be very excited about the action in the Dow and S&P as both broke out to new highs for the year on improved volume. However, while the large-cap indices are enjoying the ride, the former leaders, the small and mid-cap indices continue to struggle with a trading range that is now almost four months old.
So with the Dow now just 53 points away from the Promised Land, you can bet that the bulls have their sights set on the 11,722 level. However, the question that begs to be asked is: What will happen once we get there?
Turning to this morning, we�ve got some new economic data to review in the form of the Durable Goods report for August. The report tends to be on the volatile side and this one was no exception as total orders fell by -0.5% which was a far cry from the expectations for an increase of +0.5%. The ex-transportation number also was a surprise and showed a drop of -2%, while the important Nondefense Capital Goods Ex-Transportation number, which is a proxy for business investment, showed a drop as well, losing -0.3% for the month.
Stocks futures have weakened a bit on the news while bond prices have rallied. While, the Durable Goods report is extremely volatile and we probably shouldn�t jump to conclusions, it will be interesting to see if the trend of bad news being good news has now ended.
Running through the pre-game indicators, overseas markets are higher across the board. Gold futures are moving up this morning and are quoted at $601.70 right now. Crude oil futures are rebounding on more chatter out of OPEC and are currently up $0.61 at $61.67. Interest rates are moving lower this morning with the 2-year currently quoted at 4.65% while the 10-yr is trading with a yield of 4.55% right now. And finally, with about an hour before the bell, stock futures in the U.S. are slightly lower. The Dow futures are currently off by 15, the S&Ps are down about a point, and the NASDAQ is sporting a fractional decline at the moment.
Stocks �In Play� This Morning:
Advanced Micro Devices (AMD) � Mentioned positively at BofA
Valero (VLO) � Upgraded at BofA and Citigroup
Tesoro (TSO) � Upgraded at BofA
Sunoco (SUN) � Upgraded at Citigroup
Marathon Oil (MRO) � Upgraded at Citigroup
Millennium Pharmaceuticals (MLNM) � Mentioned negatively at BofA
Tivo (TIVO) - Mentioned positively at Citigroup
XTO Energy (XTO) � Added to focus list at Credit Suisse
Norsk Hydro (NHY) � Upgraded at Credit Suisse
Red Hat (RHAT) � Downgraded at 1st Albany, Prudential, Target reduced at Goldman
Global Crossing (GLBC) � Added to Buy List at Goldman Sachs
E-Trade (ET) � Goldman Sachs reduces estimates for discount brokers
MetLife (MET) � Removed from Focus List at JP Morgan
Gap (GPS) � Upgraded at Morgan Stanley
Applied Materials (AMAT) � Mentioned positively as part of semi-equipment note
Reynolds American (RAI) � Upgraded at UBS
Newmont Mining (NEM) � Reduces sales guidance for gold
Long positions in stocks mentioned: XTO, ET, AMAT, RAI
** 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.
www.TopGunsTrading.com
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