David Moenning�s Daily State of the Markets: 06/12
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Bears Holding Serve
For a while on Friday, it appeared that the bulls might be able to break serve and actually win a game. Thursday�s reversal day seemed to set up an opportunity for some end-of-the-week short covering and perhaps a little follow-through action. And as we mentioned, while it isn�t critical for the market to get an immediate confirmation of the reversal, it would have been a welcome event for the battered bull camp.
But with the all-important inflation data looming, no one seemed too interested in stepping up to do much buying. Sure, there are some traders in there looking to profit from the volatility, but other than that, the bulls seemed to keep their hands/hooves in their pockets. Thus, the early 40 point gain wound up giving way to a 46 point loss and the 5th down day in the last six sessions.
Right now, the bottom line is that traders are waiting on the data and all of the technical set ups in the world won�t change the way traders react on Tuesday and Wednesday. But it is worth nothing that after the shellacking the market has taken in anticipation of the reports, anything short of awful inflation data might be able to generate a sigh of relief rebound.
In terms of the Fed's reaction, at this point, the stage seems to be set for a June �just in case� rate hike - regardless of how the data comes in. While Mr. Bernanke has talked openly about pausing the campaign, he didn�t necessarily say the pause was imminent. Therefore, the markets have braced for another bump in rates and will be anxiously looking for any clue as to when the much anticipated (and very logical) pause will commence.
By increasing rates one more time, the Fed would be buying additional time to look at the data over the summer. Most economists expect the economy to slow in the second half of the year, and a pretty strong argument can be made that this is already occurring. This leads to the idea that a slowdown in the economy will take care of any non-energy induced inflation and as such, no further rate hikes will be needed.
However, as logical as this sounds, the X-factor here is the fact that Mr. Bernanke is the �new guy� and may feel the need to do more than just talk tough. Let�s remember that the Fed has a long history of overdoing it with their rate increases due to the time lag before the rate increases actually impact the economy. This fact is not lost on the markets these days and until traders can get the impression that the Fed won�t wind up wrecking the economy in their effort to be tough on inflation, then this difficult Bear-nanke market will continue.
Looking at the week ahead, all eyes will be on the PPI/CPI reports scheduled for release on Tuesday and Wednesday. In addition, we will hear from Mr. Bernanke no fewer than three times this week. Thus, by week�s end we should have a clearer picture of what to expect from the FOMC on 6/29.
The rest of the week�s economic calendar looks like this:
Monday � Monthly Budget Statement at 2:00 pm
Tuesday � PPI, Retail Sales, Business Inventories at 8:30 am
Wednesday � CPI at 8:30 am, Beige Book
Thursday � Empire Manufacturing, Industrial Production, Philly Fed
Friday � Current Account Balance, U of M�s Consumer Sentiment
Turning to this morning, despite the first Tropical Storm warning for the Gulf and Iran�s refusal to stop enriching uranium, talk of record stock buybacks by S&P companies seems to be putting a positive spin on the market so far. And while the action may be a bit thin today, perhaps the bulls can begin to mount a counter offensive here.
Running through the pre-game indicators, with the exception of Japan, all of the major overseas markets are lower. Oil futures are off earlier highs and little changed this morning. Crude is currently trading down by $0.08 to $71.55. Interest rates are also not doing much, however it should be noted that the curve continues to be slightly inverted this morning. The yield on the 2-year is currently trading at 5.03% while the 10-yr is quoted at 5.00% right now. And finally, with about an hour before the bell, stock futures in the U.S. are moving up a bit. The Dow futures are currently ahead by 22 points; the S&Ps are gaining 4.70, and the NASDAQ is sporting an advance of about 6 points.
Stocks �In Play� This Morning:
Intel (INTC) � Upgraded at First Albany, Mentioned cautiously in Barron�s
Webex Comm (WEBX) � Mentioned positively in Barron�s
EMC Corp (EMC) � Mentioned positively in Barron�s
Jos A Banks (JOSB) � Mentioned cautiously in Barron�s
ATI Technologies (ATYT) - � Mentioned cautiously at Freidman Billings
Nokia (NOK) � Qualcomm files complaint with ITC over 6 patents
McKesson (MCK) � Announces acquisition of RelayHealth Corp
Powerwave (PWAV) � To acquire wireless business unit of Filtronic
Disney (DIS) � Downgraded at Citigroup
SPX Corp (SPW) � Upgraded at Citigroup
Tellabs (TLAB) � Downgraded at Deutsche
Genzyme (GENZ) � Upgraded at Merrill Lynch
Genentech (DNA) � Upgraded at Merrill Lynch
Synaptics (SYNA) � Bear Stearns reduces estimates
Hanson (HANS)� Announces 4-1 stock split
Positions in stocks mentioned: PWAV
** 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.
For a while on Friday, it appeared that the bulls might be able to break serve and actually win a game. Thursday�s reversal day seemed to set up an opportunity for some end-of-the-week short covering and perhaps a little follow-through action. And as we mentioned, while it isn�t critical for the market to get an immediate confirmation of the reversal, it would have been a welcome event for the battered bull camp.
But with the all-important inflation data looming, no one seemed too interested in stepping up to do much buying. Sure, there are some traders in there looking to profit from the volatility, but other than that, the bulls seemed to keep their hands/hooves in their pockets. Thus, the early 40 point gain wound up giving way to a 46 point loss and the 5th down day in the last six sessions.
Right now, the bottom line is that traders are waiting on the data and all of the technical set ups in the world won�t change the way traders react on Tuesday and Wednesday. But it is worth nothing that after the shellacking the market has taken in anticipation of the reports, anything short of awful inflation data might be able to generate a sigh of relief rebound.
In terms of the Fed's reaction, at this point, the stage seems to be set for a June �just in case� rate hike - regardless of how the data comes in. While Mr. Bernanke has talked openly about pausing the campaign, he didn�t necessarily say the pause was imminent. Therefore, the markets have braced for another bump in rates and will be anxiously looking for any clue as to when the much anticipated (and very logical) pause will commence.
By increasing rates one more time, the Fed would be buying additional time to look at the data over the summer. Most economists expect the economy to slow in the second half of the year, and a pretty strong argument can be made that this is already occurring. This leads to the idea that a slowdown in the economy will take care of any non-energy induced inflation and as such, no further rate hikes will be needed.
However, as logical as this sounds, the X-factor here is the fact that Mr. Bernanke is the �new guy� and may feel the need to do more than just talk tough. Let�s remember that the Fed has a long history of overdoing it with their rate increases due to the time lag before the rate increases actually impact the economy. This fact is not lost on the markets these days and until traders can get the impression that the Fed won�t wind up wrecking the economy in their effort to be tough on inflation, then this difficult Bear-nanke market will continue.
Looking at the week ahead, all eyes will be on the PPI/CPI reports scheduled for release on Tuesday and Wednesday. In addition, we will hear from Mr. Bernanke no fewer than three times this week. Thus, by week�s end we should have a clearer picture of what to expect from the FOMC on 6/29.
The rest of the week�s economic calendar looks like this:
Monday � Monthly Budget Statement at 2:00 pm
Tuesday � PPI, Retail Sales, Business Inventories at 8:30 am
Wednesday � CPI at 8:30 am, Beige Book
Thursday � Empire Manufacturing, Industrial Production, Philly Fed
Friday � Current Account Balance, U of M�s Consumer Sentiment
Turning to this morning, despite the first Tropical Storm warning for the Gulf and Iran�s refusal to stop enriching uranium, talk of record stock buybacks by S&P companies seems to be putting a positive spin on the market so far. And while the action may be a bit thin today, perhaps the bulls can begin to mount a counter offensive here.
Running through the pre-game indicators, with the exception of Japan, all of the major overseas markets are lower. Oil futures are off earlier highs and little changed this morning. Crude is currently trading down by $0.08 to $71.55. Interest rates are also not doing much, however it should be noted that the curve continues to be slightly inverted this morning. The yield on the 2-year is currently trading at 5.03% while the 10-yr is quoted at 5.00% right now. And finally, with about an hour before the bell, stock futures in the U.S. are moving up a bit. The Dow futures are currently ahead by 22 points; the S&Ps are gaining 4.70, and the NASDAQ is sporting an advance of about 6 points.
Stocks �In Play� This Morning:
Intel (INTC) � Upgraded at First Albany, Mentioned cautiously in Barron�s
Webex Comm (WEBX) � Mentioned positively in Barron�s
EMC Corp (EMC) � Mentioned positively in Barron�s
Jos A Banks (JOSB) � Mentioned cautiously in Barron�s
ATI Technologies (ATYT) - � Mentioned cautiously at Freidman Billings
Nokia (NOK) � Qualcomm files complaint with ITC over 6 patents
McKesson (MCK) � Announces acquisition of RelayHealth Corp
Powerwave (PWAV) � To acquire wireless business unit of Filtronic
Disney (DIS) � Downgraded at Citigroup
SPX Corp (SPW) � Upgraded at Citigroup
Tellabs (TLAB) � Downgraded at Deutsche
Genzyme (GENZ) � Upgraded at Merrill Lynch
Genentech (DNA) � Upgraded at Merrill Lynch
Synaptics (SYNA) � Bear Stearns reduces estimates
Hanson (HANS)� Announces 4-1 stock split
Positions in stocks mentioned: PWAV
** 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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