David Moenning's Daily State of the Markets: 11/15
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Welcome Words
Good morning. With yesterday�s PPI data suggesting that the economy might be moderating a bit too quickly to support the soft landing thesis, it looked like the bulls were ready to call it a day early. Stocks opened lower and it appeared that we may be in for some corrective activity. But then our heroes in horns got some welcome words on the state of the economy from an unlikely supporter.
Although the PPI data came in at the lowest level in five years and the Core Rate fell by the largest amount since 1993, at the end of the day, stocks managed to put aside worries over the economy and busted a move to new highs. The DJIA, NYSE, and Russell 2000 finished at fresh new all-time highs while the NASDAQ and S&P 500 put in their best close since the early days of the bear market.
What seemed to turn the tide for the bulls yesterday morning were comments from St. Louis Fed President William Poole. Mr. Poole suggested that current Fed policy, which, at the moment, is usually described as sitting on the sidelines, as �about right� and mentioned that inflation does not appear to be a concern at the moment. In short, Mr. Poole�s remarks reassured traders that the Fed was still on the case and things were progressing according to plan.
And while these were welcome words, well, as far as the bulls are concerned anyway, we can�t attribute Mr. Poole�s comments for the record breaking blast higher into the close. No, we have to dig deeper to find a reason for yesterday afternoon�s sudden rally resumption.
Sure, there were some solid earnings reports from the likes of Wal-Mart and some other retailers. Yes, the Retail Sales report was a smidge better than expected. And it is true that Intel and the tech arena got a nice boost from the company�s announcement that they were rolling out their new quad-core processors earlier than expected. But, the real reason for the unexpected dance to new high territory had to do with the inner workings of the street.
It turns out that there has been a very large seller of S&P futures recently who had decided to go the other way. But, you see, the problem with selling short is that if the market goes against you and you have to close your position, it entails buying the security that you were betting against. And in this case, the covering of a hefty short in the S&P created a technical breakout on the charts.
To unknowing investors, the breakout was as a positive sign and there was obviously some bandwagon hopping going on into the close. But, with the knowledge that the move could be considered artificial, shouldn�t we be leery of the move? Well, not really, because we should remember that, as far as the technicians are concerned, the reason �why� a move happens is of little consequence. So, all�s well that ends well because a breakout is a breakout and volume picked up on the move.
Turning to this morning, things are fairly quiet in the early going. On the economic front, the Empire Manufacturing report came in a bit stronger than expected at a reading of 26.7 versus expectations of 15.0. This report is not a big market-mover but should help support the Goldilocks scenario.
Running through the rest of the pre-game indicators, the major overseas markets are mostly higher. Gold futures are moving down a bit so far and are quoted at $619.20 right now. Crude futures are moving up some this morning, with the latest quote showing oil up $0.24 to $58.52. Interest rates are doing little so far with the 2-year currently quoted at 4.74% while the 10-yr is trading near the recent lows with a yield of 4.57% right now. And finally, with about an hour before the bell, stock futures in the U.S. are showing little movement. The Dow futures are currently ahead by just 8 points, the S&Ps are higher by a fraction of a point, and the NASDAQ looks to be about 2 points above fair value at the moment.
Stocks �In Play� This Morning:
Tyco (TYC) � Reported $0.51 vs. $0.49
Goldcorp (GG) � Reported $0.22 vs. $0.29
US Airways (LCC) � Proposes merger with Delta
Yahoo (YHOO) � Barron�s identifies sales at Fidelity
Mellon Financial (MEL) � Upgraded at BofA
Norfolk Southern (NSC) � Mentioned positively at Bear Stearns
Microsoft (MSFT) � Bear Stearns initiates coverage with Peer Perform rating
Apple (AAPL) � Bernstein initiates coverage with Market Perform rating
Google (GOOG) � Credit Suisse resumes coverage with Outperform rating
Ashland (ASH) � Downgraded at Credit Suisse
Vodafone (VOD) � Upgraded at Deutsche Bank
Cheesecake Factory (CAKE) � Upgraded at Friedman Billings Ramsey
Altria (MO) � Upgraded at Goldman Sachs
Home Depot (HD) � Upgraded at JP Morgan
Saks (SKS) � Upgraded at Merrill Lynch
Abbott Labs (ABT) � Upgraded at Morgan Stanley
Long positions in stocks mentioned: BSC, JPM, MER, NSC, MO, MS
** 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.
Good morning. With yesterday�s PPI data suggesting that the economy might be moderating a bit too quickly to support the soft landing thesis, it looked like the bulls were ready to call it a day early. Stocks opened lower and it appeared that we may be in for some corrective activity. But then our heroes in horns got some welcome words on the state of the economy from an unlikely supporter.
Although the PPI data came in at the lowest level in five years and the Core Rate fell by the largest amount since 1993, at the end of the day, stocks managed to put aside worries over the economy and busted a move to new highs. The DJIA, NYSE, and Russell 2000 finished at fresh new all-time highs while the NASDAQ and S&P 500 put in their best close since the early days of the bear market.
What seemed to turn the tide for the bulls yesterday morning were comments from St. Louis Fed President William Poole. Mr. Poole suggested that current Fed policy, which, at the moment, is usually described as sitting on the sidelines, as �about right� and mentioned that inflation does not appear to be a concern at the moment. In short, Mr. Poole�s remarks reassured traders that the Fed was still on the case and things were progressing according to plan.
And while these were welcome words, well, as far as the bulls are concerned anyway, we can�t attribute Mr. Poole�s comments for the record breaking blast higher into the close. No, we have to dig deeper to find a reason for yesterday afternoon�s sudden rally resumption.
Sure, there were some solid earnings reports from the likes of Wal-Mart and some other retailers. Yes, the Retail Sales report was a smidge better than expected. And it is true that Intel and the tech arena got a nice boost from the company�s announcement that they were rolling out their new quad-core processors earlier than expected. But, the real reason for the unexpected dance to new high territory had to do with the inner workings of the street.
It turns out that there has been a very large seller of S&P futures recently who had decided to go the other way. But, you see, the problem with selling short is that if the market goes against you and you have to close your position, it entails buying the security that you were betting against. And in this case, the covering of a hefty short in the S&P created a technical breakout on the charts.
To unknowing investors, the breakout was as a positive sign and there was obviously some bandwagon hopping going on into the close. But, with the knowledge that the move could be considered artificial, shouldn�t we be leery of the move? Well, not really, because we should remember that, as far as the technicians are concerned, the reason �why� a move happens is of little consequence. So, all�s well that ends well because a breakout is a breakout and volume picked up on the move.
Turning to this morning, things are fairly quiet in the early going. On the economic front, the Empire Manufacturing report came in a bit stronger than expected at a reading of 26.7 versus expectations of 15.0. This report is not a big market-mover but should help support the Goldilocks scenario.
Running through the rest of the pre-game indicators, the major overseas markets are mostly higher. Gold futures are moving down a bit so far and are quoted at $619.20 right now. Crude futures are moving up some this morning, with the latest quote showing oil up $0.24 to $58.52. Interest rates are doing little so far with the 2-year currently quoted at 4.74% while the 10-yr is trading near the recent lows with a yield of 4.57% right now. And finally, with about an hour before the bell, stock futures in the U.S. are showing little movement. The Dow futures are currently ahead by just 8 points, the S&Ps are higher by a fraction of a point, and the NASDAQ looks to be about 2 points above fair value at the moment.
Stocks �In Play� This Morning:
Tyco (TYC) � Reported $0.51 vs. $0.49
Goldcorp (GG) � Reported $0.22 vs. $0.29
US Airways (LCC) � Proposes merger with Delta
Yahoo (YHOO) � Barron�s identifies sales at Fidelity
Mellon Financial (MEL) � Upgraded at BofA
Norfolk Southern (NSC) � Mentioned positively at Bear Stearns
Microsoft (MSFT) � Bear Stearns initiates coverage with Peer Perform rating
Apple (AAPL) � Bernstein initiates coverage with Market Perform rating
Google (GOOG) � Credit Suisse resumes coverage with Outperform rating
Ashland (ASH) � Downgraded at Credit Suisse
Vodafone (VOD) � Upgraded at Deutsche Bank
Cheesecake Factory (CAKE) � Upgraded at Friedman Billings Ramsey
Altria (MO) � Upgraded at Goldman Sachs
Home Depot (HD) � Upgraded at JP Morgan
Saks (SKS) � Upgraded at Merrill Lynch
Abbott Labs (ABT) � Upgraded at Morgan Stanley
Long positions in stocks mentioned: BSC, JPM, MER, NSC, MO, MS
** 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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