David Moenning�s Daily State of the Markets 07/27
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Refusing to Buckle
Good morning. The bears were back on Wednesday, but this time the bulls refused to yield the right of way. Armed with a Beige Book Report, lower oil in the early going, and a surprisingly strong report from GM, the bulls were able to turn a potential decline into a draw.
Sure, our barnyard buddies would have preferred to see another strong close. But after a couple of impressive up days, most traders were probably expecting the same old pattern where the bears sell all rallies. But this time it didn�t happen and at the end of the day the bulls were heard saying something about a trend being broken.
While it is hard to get too fired up about a day that produced swings good for 110 points and yet finished flat, we certainly have to give the bulls their due here. Since the bears were finally rebuffed, we will have to admit that conditions may have improved in the short-term and that we just might have a ballgame on our hands right now.
The key to the day was the release of the Fed�s Beige Book Report, which provides information from all 12 Fed Districts. The headlines from the report hailed that the Fed notes a slowing pace of economic growth. While this was really nothing new, the continued focus on the moderation in growth was seen as a further indication that we may get a pause in the hike down the measured path after the next meeting.
In addition, the bulls were able to gloss over the part of the report that talked about some upward pressure on wages and elevated energy prices keeping inflation prospects alive. But we had heard it all before from Mr. Bernanke during last week�s testimony, so the bears were left wanting.
But it would be na�ve to think that the bears are going to dry up and blow away at this point. The major indices have enjoyed a nice pop up off the bottom, which makes everyone breathe a little easier. However, the markets are no longer oversold and resistance looms overhead on the charts. So, as we mentioned earlier, it looks like we�ve got a game on our hands now � and may the best team win.
Turning to this morning, the report on sales of Durable Goods will keep the economists guessing as to what the Fed will do next. Despite all the talk about a slowing economy, Durable Goods for June came in with a gain of 3.1%, which was much stronger than the projection for 2.0%. And when you strip out transportation orders, the song remains the same as orders improved by 1.0% versus the consensus estimate of +0.7%. However, the markets have not moved significantly lower in response to the report.
Running through the rest of the pre-game indicators, overseas markets are up strong with gains in excess of 1% in most major markets. Gold futures are rebounding by more than $9 this morning and are currently exchanging hands at $631.10. Oil is also moving up this morning and crude futures are currently trading up by $0.81 to $74.75. Interest rates are heading a little higher this morning as the yield curve appears to be flattening again. The 2-year is currently quoted at 5.05% while the 10-yr is trading with a yield at 5.04% right now. And finally, with about an hour before the bell, stock futures in the U.S. are moving on up. The Dow futures are currently ahead by 32; the S&Ps are gaining 3.80, and the NASDAQ is sporting an advance of about 8 points.
Stocks �In Play� This Morning:
Cummins (CMI) � Reported $3.83 vs. $3.48
FedEx (FDX) � Downgraded at Bear Stearns
Cymer Inc (CYMI) � Upgraded at Merrill Lynch
Chesapeake Energy (CHK) � Upgraded at Merrill
Freeport McMoRan (FCX) � Target price increased at UBS
Phelps Dodge (PD) � Target price increased at UBS
Coca Cola Enterprises (CCE) � Reported $0.57 vs. $0.55
Comcast (CMCSA) � Reported $0.22 vs. $0.20
Disney (DIS) � Upgraded at JP Morgan
Harley Davidson (HDI) � Upgraded at Goldman Sachs
Business Objects (BOBJ) � Upgraded at Credit Suisse, First Albany
Borders Group (BGP) � Mentioned cautiously in Barron�s
Lone Star Tech (LSS) � Downgraded at Bear Stearns, Jeffries
Hanson (HAN) � Upgraded at Citigroup
Chemed (CHE) � Upgraded at Deutsche
Micrel (MCRL) � Upgraded at Deutsche
Level 3 Comm (LVLT) � Upgraded at Goldman Sachs
Kemet (KEM) � Upgraded at Merrill
Dow Chemical (DOW) � Reported $1.05 vs. $1.15
Prologis (PLD) � Reported $0.90 vs. $0.73
Newmont (NEM) � Reported $0.36 vs. $0.49
Long positions in stocks mentioned: GS, BSC, CMI, FDX, CHK, CCE, PLD
** 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.
Good morning. The bears were back on Wednesday, but this time the bulls refused to yield the right of way. Armed with a Beige Book Report, lower oil in the early going, and a surprisingly strong report from GM, the bulls were able to turn a potential decline into a draw.
Sure, our barnyard buddies would have preferred to see another strong close. But after a couple of impressive up days, most traders were probably expecting the same old pattern where the bears sell all rallies. But this time it didn�t happen and at the end of the day the bulls were heard saying something about a trend being broken.
While it is hard to get too fired up about a day that produced swings good for 110 points and yet finished flat, we certainly have to give the bulls their due here. Since the bears were finally rebuffed, we will have to admit that conditions may have improved in the short-term and that we just might have a ballgame on our hands right now.
The key to the day was the release of the Fed�s Beige Book Report, which provides information from all 12 Fed Districts. The headlines from the report hailed that the Fed notes a slowing pace of economic growth. While this was really nothing new, the continued focus on the moderation in growth was seen as a further indication that we may get a pause in the hike down the measured path after the next meeting.
In addition, the bulls were able to gloss over the part of the report that talked about some upward pressure on wages and elevated energy prices keeping inflation prospects alive. But we had heard it all before from Mr. Bernanke during last week�s testimony, so the bears were left wanting.
But it would be na�ve to think that the bears are going to dry up and blow away at this point. The major indices have enjoyed a nice pop up off the bottom, which makes everyone breathe a little easier. However, the markets are no longer oversold and resistance looms overhead on the charts. So, as we mentioned earlier, it looks like we�ve got a game on our hands now � and may the best team win.
Turning to this morning, the report on sales of Durable Goods will keep the economists guessing as to what the Fed will do next. Despite all the talk about a slowing economy, Durable Goods for June came in with a gain of 3.1%, which was much stronger than the projection for 2.0%. And when you strip out transportation orders, the song remains the same as orders improved by 1.0% versus the consensus estimate of +0.7%. However, the markets have not moved significantly lower in response to the report.
Running through the rest of the pre-game indicators, overseas markets are up strong with gains in excess of 1% in most major markets. Gold futures are rebounding by more than $9 this morning and are currently exchanging hands at $631.10. Oil is also moving up this morning and crude futures are currently trading up by $0.81 to $74.75. Interest rates are heading a little higher this morning as the yield curve appears to be flattening again. The 2-year is currently quoted at 5.05% while the 10-yr is trading with a yield at 5.04% right now. And finally, with about an hour before the bell, stock futures in the U.S. are moving on up. The Dow futures are currently ahead by 32; the S&Ps are gaining 3.80, and the NASDAQ is sporting an advance of about 8 points.
Stocks �In Play� This Morning:
Cummins (CMI) � Reported $3.83 vs. $3.48
FedEx (FDX) � Downgraded at Bear Stearns
Cymer Inc (CYMI) � Upgraded at Merrill Lynch
Chesapeake Energy (CHK) � Upgraded at Merrill
Freeport McMoRan (FCX) � Target price increased at UBS
Phelps Dodge (PD) � Target price increased at UBS
Coca Cola Enterprises (CCE) � Reported $0.57 vs. $0.55
Comcast (CMCSA) � Reported $0.22 vs. $0.20
Disney (DIS) � Upgraded at JP Morgan
Harley Davidson (HDI) � Upgraded at Goldman Sachs
Business Objects (BOBJ) � Upgraded at Credit Suisse, First Albany
Borders Group (BGP) � Mentioned cautiously in Barron�s
Lone Star Tech (LSS) � Downgraded at Bear Stearns, Jeffries
Hanson (HAN) � Upgraded at Citigroup
Chemed (CHE) � Upgraded at Deutsche
Micrel (MCRL) � Upgraded at Deutsche
Level 3 Comm (LVLT) � Upgraded at Goldman Sachs
Kemet (KEM) � Upgraded at Merrill
Dow Chemical (DOW) � Reported $1.05 vs. $1.15
Prologis (PLD) � Reported $0.90 vs. $0.73
Newmont (NEM) � Reported $0.36 vs. $0.49
Long positions in stocks mentioned: GS, BSC, CMI, FDX, CHK, CCE, PLD
** 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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