David Moenning�s Daily State of the Markets: 01/16

Time to Sharpen the Pencils

Good Tuesday morning and welcome back. While it seems like ancient history after the long holiday weekend, stocks continued to move up on Friday with the Dow once again finishing at a fresh all-time high. And for the first time in a long time, it was interesting to note that every single index on my screen was flashing green by the close. While there weren�t a lot of fireworks on the day, the NASDAQ did finish at a fresh six-year high and the S&P 500 closed at its best level since late 2000. And although the Small Caps still have some work to do to make new highs, the S&P Mid Cap index also managed to eek out a new record close.

Lower oil and enthusiasm toward tech continued to be the primary movers of the market. However, with the quarterly earnings parade beginning to roll, analysts are likely to sharpen their pencils and take a hard look at the numbers as they come in. So despite the bulls appearing to be back in control, it�s probably a good idea to stay tuned in over the next couple of weeks.



The problem is we�ve enjoyed seventeen straight quarters of double-digit earnings growth, which is a record. And while everyone expects the growth rate to slow down a bit for the fourth quarter, the question now becomes: How much is enough to keep the bulls rolling? Will we get an eighteenth straight quarter of double digit growth? Right now the analysts view the odds for a 10% gain in earnings as a coin toss. And if we see anything below 10%, will the bears view this as an opportunity?



This week we�ll get a peek a some pretty big numbers including Intel after the close today, JP Morgan, Southwest Airlines, Bank of New York, and Apple on Wednesday, Merrill Lynch, KB Homes, Pfizer, United Health, Capital One, and Motorola on Thursday, and Citigroup, Schlumberger, and GE on Friday.



In addition, we�ve got a pretty busy week in terms of the economic calendar:

- Wednesday: Bank of Japan Announces Rate Decision, PPI, Industrial Production

- Thursday: CPI, Housing Starts, Index of Leading Economic Indicators, and Philly Fed Index

- Friday: University of Michigan�s Consumer Sentiment Index





Turning to this morning, the tech bulls have been dealt another blow as both Bank of America and Prudential are out with downgrades of Cisco. However, lower oil and green screens overseas are keeping a bid under the futures at the present time.



On the economic front, this morning�s Empire Manufacturing index came in well below expectations at 9.1. The consensus was for a reading of 19.3; however, the markets haven�t shown much reaction to this data.



Running through the pre-game indicators, the foreign markets were lower overnight but are higher from where they closed on Friday. Gold futures are a little lower this morning with the last trade off $1.20 to $625.70. In the oil pits, crude futures are lower on the Saudi announcement that they see no need for an interim OPEC meeting. The latest quote shows the February futures contract down $0.89 to $52.10. Interest rates are moving lower this morning on the weaker manufacturing data and the 10-year is currently trading with a 4.74% yield. And finally, with an hour before the bell, stock futures in the U.S. are looking up slightly. The Dow futures are currently ahead by 15 points; the S&P�s are 1.80 points ahead, while the NASDAQ looks to be about 3 points above fair value at the moment.



Stocks �In Play� This Morning:

Wells Fargo (WFC) � Reported $0.64 vs. $0.64

Freeport McMoRan (FCX) � Reported $1.99 vs. $2.12

Forest Labs (FRX) � Reported $0.78 vs. $0.66, Raises guidance

Waddell & Reed (WDR) � Downgraded at AG Edwards

XM Satellite Radio (XMSR) � Downgraded at BofA

Cisco Systems (CSCO) � Downgraded at BofA, Prudential

Janus Capital (JNS) � Downgraded at CIBC Capital

Coeur D� Alene Mines (CDE) � Downgraded at CIBC

Novellus Systems (NVLS) � Downgraded at Deutsche Bank

KLA-Tencor (KLAC) � Downgraded at Deutsche Bank

Lam Research (LRCX) � Downgraded at Deutsche Bank

Monsanto (MON) � Added to Conviction Buy list at Goldman Sachs

Nokia (NOK) � Upgraded at Goldman Sachs

FedEx (FDX) � Upgraded at JP Morgan

Darden Restaurants (DRI) � Upgraded at JP Morgan

Cameron Corp (CAM) � Downgraded at Morgan Stanley

Abercrombie & Fitch (ANF) � Upgraded at Prudential

Masco (MAS) � Upgraded at UBS


** 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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