David Moenning�s Daily State of the Markets 06/23

Looking For the DMZ

Good Friday morning. The choppy, up one day and then down the next, pattern continued yesterday as stocks gave up more than half of Wednesday�s gains in response to a weaker-than expected reading from the LEI. In short, the bulls once again failed to make any headway against the resistance overhead and appear content to wait for the Fed at or near these levels.

Whenever there is time, the markets like to brace for a big-bad event by settling at an equilibrium point, which is a price zone that has been approved by both teams through a series of tests from both directions. In this case, it is the Fed meeting that has both the stock and bond market searching for a demilitarized zone.

Stocks have fallen hard over the past month on the idea that the Fed is now the enemy and appears resolute in their quest to continue raising rates. The FOMC has thus moved away from Mr. Greenspan�s plan of simply �removing excess accommodation� and is now embarking on a �get tough on inflation� plan. And as any analyst worth their salt knows, it rarely pays to fight the Fed.

All of the Fed�s tough talk pushed stocks down on a daily basis over the past month. Stocks became very oversold and pessimism grew to levels not seen since the Bubble Bear ended, which set up the market for a bounce higher. Thus, with the recent bounce, the bulls have effectively corrected some of the excess created by the correction.

So where does this leave us? In our humble opinion � we are now at or near an equilibrium point and waiting on some additional data to provide an impetus for the next move. If the markets receive data that supports a pause, then stocks can rally much higher from here. But if the FOMC starts to get a whiff of inflation, then the bears are almost certain to remain in control.

Turning to this morning, traders have a lot to talk about. There some economic data, some merger news in the oil patch as Anadarko Petroleum is on a spending spree, and some discussion of the Fed hiking rates by 50 basis points next week.

The report on Durable Goods was a bit surprising on all fronts. The headline number came with a decline of -0.3%, when and increase of +0.4% was expected. Next, when you strip out the ultra big-ticket transportation orders, the numbers were a bit better than expected. And finally, the economists favorite number, the Non-defense, ex-aircraft durable goods orders rose by 1%, which was an improvement from the -1.9% decline seen last month.

Running through the rest of pre-game indicators, overseas markets are little changed this morning. Gold is moving lower so far today and is trading off by $7.40 to $578. Oil is moving down a little this morning and August crude futures are currently trading lower by $0.37 to $70.47. Interest rates are pulling back on the weaker Durable Goods numbers. The 2-year is currently trading at 5.21% while the 10-yr is quoted at 5.18% right now. And finally, with about an hour before the bell, stock futures in the U.S. are doing very little. The Dow futures are currently off by 6 points; the S&Ps are down a fraction, and the NASDAQ is sporting an decline of 2 points.

Stocks �In Play� This Morning:

FedEx (FDX) � Mentioned positively in WSJ
Schlumberger (SLB) � Upgraded at Calyon, Mentioned positively in WSJ
Caterpillar (CAT) � Mentioned positively in WSJ
Goldman Sachs (GS) � Mentioned positively in WSJ
Qualcomm (QCOM) � Downgraded at JP Morgan
Advanced Micro Devices (AMD) � Upgraded at Merrill
Suncor Energy (SU) � Upgraded at Deutsche
Royal Dutch Shell (RDS.A) � Upgraded at Deutsche
Kerr McGee (KMG) � Being acquired by Anadarko Petroleum
Microchip Tech (MCHP) � Upgraded at Bernstein
Agnico Eagle Mines (AEM) � Estimates reduced at JP Morgan
Intel (INTC) � QCOM accusing INTC of stalling development of wireless standard
Stone Energy (SGY) � Being acquired by Energy Partners
Western Gas Reserve (WGR) � Being acquired by Anadarko Petroleum
Health Management Assoc. (HMA) � Guides lower
Taiwan Semiconductor (TSM) � Estimates reduced at BofA
AG Edwards (AGE) � Upgraded at Bernstein

Remember to take time to enjoy your day and until next time, �may the bulls be with you!�

Positions in stocks mentioned: FDX, ALB

** 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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