David Moenning Daily State of the Markets: 11/17

Needing Both Hands

The stock market encountered a mixed bag of data points to work from yesterday and the results basically reflected as much. It was definitely a day that required both hands to weigh the happenings. On the one hand, we got decent news on the inflation front and the flow of funds from foreign investors, which put a bid under the market in the early going. But about mid-morning, the �other hand� made an appearance and traders had to deal with a turnaround in oil prices, more problems with GM, concerns about expectations at American Express, and a pretty crummy report on the state of the housing market.

The end result was another day of hanging around the highs for the major indices. While stocks are still overbought and the resistance levels haven�t gone away, it is positive that, so far at least, the market has not succumbed to any real selling. Yes, the calendar may indeed be playing a role, but overall, the bulls have to be pleased with their efforts lately.

The day started off on a positive note as the CPI's gain of just +0.2% was the best in four months and quite a relief after September�s horrific report. Traders were also encouraged by the Core Rate, which continues to stay low and helps convince economists and Fed members alike that inflation isn�t overheating at the moment. Bonds were also a bright spot yesterday as prices spiked higher and the yield on the 10-yr dropped to 4.48%. The reason for the advance was simple as the government reported that record levels of foreign money have flowed into U.S. investments lately.

Unfortunately however, traders also had to deal with a spate of negatives yesterday. There was the usual mess over at GM, which hit an 18-year low as investors worried about relations with Delphi and the new round of discounts. There was the drop in American Express and the resulting worries about the economy after the CEO suggested that analyst expectations were �far too high.� There was the surprise drop in oil inventories of 2.2 million barrels, when a gain of 2 million had been expected. And finally, there was evidence that the housing market appears to be cooling off quickly.

Turning to this morning, the reports on Housing Starts and Building Permits were both weaker than expected. Starts fell -5.6% from last month�s report and Permits dropped -6.7%, which is the biggest decline since 1999.

While the data will undoubtedly impact the homebuilders, the markets have a positive tone overall this morning. The bond market is fairly steady with yields at 4.49%, oil is moving higher by $0.44 to $58.32, and stock futures are above fair-value and pointing to a stronger open (Dow +19, S&P +3.40, and NASDAQ +4.50).

So with traders appearing to be in a good mood this morning, the question remains the same: Will the bulls be able to find the support to break through the overhead resistance and finish the year strong, or will the bears take the ball and run with it for a while?

Stocks "In Play" This Morning:
COP � Downgraded at JP Morgan
INTC/AAPL � Report from Think Secret that AAPL will launch INTC-Based laptops in Jan
GDT � Downgraded at Lazard

Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: COP

To see David Moenning Trading Record, his (Strong Buy) List, or the rank for any Top Guns Stocks, visit: http://www.AnotherWinningTrade.com/SI

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