David Moenning�s Daily State of the Markets: 10/25

Bulls Get Down Days Too

Good morning. By all accounts, yesterday should have been a down day. Oil was up, there were some disappointing earnings numbers, the economic data � what little there was � was weaker than expected, interest rates have been moving up lately, and the Fed sat down to begin its October meeting. And in fact, stocks did move lower yesterday � well, for about an hour anyway.

On a day where traders were left wanting for catalysts, it would have been logical for stocks to pull back. After all, the bulls have won just about every encounter lately, which has left the market in an overbought condition by just about any measurement. And with the Fed on tap and likely to utter some harsh words about inflation, in all likelihood, some profit taking would normally have occurred.

But folks, these are NOT normal times for the market. The overbought condition is simply an indication of strength, the Dow has no overhead resistance to be concerned with, there is a good bit of bandwagon hopping occurring, and as a result, the Bulls even win the down days.

Understand that we�re not talking about yet another big up day here. No, a gain of 11 points is hardly anything to get excited about. The point is that the charts are becoming parabolic and the bulls are going unchallenged at the present time. And while we REALLY hate to be the ones to pour cold water on the fun, we should recognize that things might be getting a little one-sided at the present time.

However, whenever the bulls get rolling like this, it generally doesn�t pay to argue. So, while we�re watching the action with a skeptical eye, we see no reason to head for the hills at the present time. We�d still like to see a pullback to test the bulls� conviction, but we are cognizant of the fact that Ms. Market doesn�t give a hoot about what we think she ought to do.

Turning to this morning, there is again no economic news scheduled for release before the bell, but we will get the report on Existing Home sales at 10:00 am. However, all eyes and ears will be on the Fed today. At 2:15 eastern, we are likely to learn that the FOMC has decided to leave interest rates unchanged. But, what investors really want to hear is what the Fed has to say about their view of inflation going forward. Thus, the language in the statement will attract a lot of attention this afternoon.

In looking at the pre-market activity, it appears that the bull train may be parked at the station for a while this morning as traders await the Fed announcement.

Running through the pre-game indicators, with the exception of Japan, the major overseas markets are fractionally higher this morning. Gold futures are moving a little lower and are quoted at $585.80 right now. Crude futures are continuing to rebound northward; with the latest quote showing oil up $0.22 to $59.57. Interest rates are little changed this morning with the 2-year currently quoted at 4.91% while the 10-yr is trading with a yield of 4.83% right now. And finally, with an hour before the bell, stock futures in the U.S. are waffling around breakeven. The Dow futures are currently right at fair value, the S&Ps are down a fraction, and the NASDAQ is showing a gain of almost a point at the moment.

Stocks �In Play� This Morning:
Amazon.com (AMZN) � Reported $0.05 Vs. $0.03
Boeing (BA) � Reported $0.89 Vs. $0.63, Raises guidance
Colgate Palmolive (CL) � Reported $0.73 Vs. $0.72
General Motors (GM) � Reported $0.93 Vs. $0.45
Harrah�s Ent (HET) � Reported $0.94 Vs. $0.99
Intl Sec Exchange (ISE) � Reported $0.35 Vs. $0.31
Norfolk Southern (NSC) � Reported $1.02 vs. $0.82
Seagate Technology (STX) � Reported $0.23 Vs. $0.18, � Downgraded at Merrill
Crane (CR) � Downgraded at Bear Stearns
Websense (WBSN) � Upgraded at JMP Securities
Jetblue Airways (JBLU) � Upgraded at JP Morgan
Banco Santander (SAN) � Upgraded at Merrill Lynch
Digital River (DRIV) � Downgraded at Oppenheimer
Stanley Works (SWK) � Downgraded at Prudential
Plantronics (PLT) � Upgraded at RW Baird
Texas Instruments (TXN) � Downgraded at RW Baird
Qwest Comm (Q) � Upgraded at UBS
Northrop Grumman (NOC) � Downgraded at Wachovia
Checkfree (CKFR) � Downgraded at Wachovia

Long positions in stocks mentioned: MER, Q, ISE

** 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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