David Moenning�s Daily State of the Markets: 09/26

Thank the Calendar

Good morning. While Monday�s rally to a fresh five and one-half year highs in the S&P may have restored the bulls� confidence, the catalyst for the move was not entirely obvious. The popular press reports that stocks responded positively to Dallas Fed President Richard Fisher�s remarks that inflation should moderate over time and that other than housing, the economy looks solid. However, Mr. Fisher�s remarks hit the wires just 2 minutes after the opening bell and the rally didn�t really get started until lunch time.

The other factors on the day also presented a rather conflicting picture. The only economic report of the day showed Existing Home Sales falling -0.5%, which was actually a hair better than expectations. However, the sales volume was the lowest since January 2004 and the median price of homes sold FELL for the first time since 1995. So, it is hard to see how this data could be considered bullish.

Then there was the oil market. While a move below $60, which marked the lowest level in 10 months, made headlines in the morning, traders reversed prices hard during the lunch break and crude oil finished the day $0.90 higher at $61.45. So again, it�s tough to make the argument that this was overly bullish for stock prices.

And finally, the action in the bond pits should demand our attention. The recent plunge in interest rates continued yesterday with the yield on the 10-year falling to 4.56%, which is the lowest level since February. The move has completely erased the rally which was based on fears that the Fed would overdo it and now clearly makes the argument that the economy is slowing. However, while we can argue that lower bond yields are usually a positive for stocks, the current focus on all things economic makes this one a stretch at the present time.

So there you have it; the Fed�s Mr. Baseball�s comments could indeed have been interpreted as bullish, but the timing wasn�t quite right. Then the economic reports, the reversal in oil, and the action in the bond market would argue for lower prices � and yet, stocks held a nearly 100 point gain going into the last half-hour and finished with a solid advance on strong volume. Hmmm� I guess we�d better give credit where credit is due and thank the calendar for the advance.

For those of you keeping score at home, there are just 4 more trading days in the third quarter, which means its �window dressing� time for fund managers. In general, during the final days of each quarter, stocks tend to move in the same direction as the overall trend during the quarter. Thus, if stocks are up during the quarter, the argument goes that managers will �dress up� their portfolios by buying more of their favorites into the end of the reporting period.

Turning to this morning, things are fairly quiet, there are no economic reports before the bell and the pre-game indicators are pointing to a flattish open on Wall Street. Overseas markets are mixed by region with stocks higher in Europe and lower in the major Asian markets. Gold futures are moving lower this morning and are quoted down -$2.60 at $593.30 right now. Crude oil futures are pulling back a bit after yesterday�s bounce and are currently down $0.26 at $61.19. Interest rates are steady this morning with the 2-year currently quoted at 4.66% while the 10-yr is trading with a yield of 4.56% right now. And finally, with about an hour before the bell, stock futures in the U.S. are about even with fair value. The Dow futures are currently ahead by 7, the S&Ps are higher by a point, and the NASDAQ is sporting a gain of 2.20 at the moment.

Stocks �In Play� This Morning:

Apple Computer (AAPL) � ThinkSecret reports Cingular will be exclusive carrier for iPhone
Kohls (KSS) � Downgraded at Credit Suisse
Nordstrom (JWN) � Downgraded at Credit Suisse
JC Penney (JCP) � Downgraded at Credit Suisse
Micron Technology (MU) � Downgraded at Credit Suisse
Barr Pharma (BRL) � Added to Buy List at Goldman Sachs
Mylan Labs (MYL) � Removed from Buy List at Goldman Sachs
Reuters (RTRSY) � Downgraded at Goldman Sachs
Harrah�s Entertainment (HET) � Downgraded at JP Morgan
Advanced Medical Optics (EYE) � Downgraded at Prudential, Bear Stearns
Accenture (CAN) � Downgraded at RBC Capital
Affiliated Computer Services (ACS) � Downgraded at RBC Capital
EGL Inc (EAGL) � Upgraded at RW Baird
Career Education (CECO) � Upgraded at UBS
Lear Corp (LEA) � Upgraded at UBS
Piper Jaffray (PJC) � Downgraded at Wachovia
Altria (MO) � Downgraded at AG Edwards

Long positions in stocks mentioned: KSS, JWN, JCP, ACS

** 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

You May Also Be Interested In

• After-Hours Movers: AMAT, DLO, GLOB, YSS, ETON
• After-Hours Movers: CSCO, COHR, HLIT, CBRS, STUB, ENS
• After-Hours Movers: P, RIOT, BW, RKLB, HIMS, UPWK