David Moenning Daily State of the Markets: 1/23
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Brand New Ballgame
After Friday�s thrashing, it looks like we�ve got a brand new ballgame on our hands. The bulls clearly ran away with the game for the first couple of weeks of the New Year, but if nothing else, Friday�s drop of -200 points showed that the bears are still in the game and are in fact, a force to be reckoned with. The worst one-day drubbing in almost three years pushed the venerable DJIA into the red for the year and took the returns on the other major indices back down to levels where the outcome of this year�s game may suddenly be in question.
The list of reasons for Friday�s setback is rather long but the actual catalyst for the big drop is not entirely clear. Disappointing earnings from Dow heavyweights Citigroup and GE certainly set the stage in the pre-market as traders extrapolated earnings from the �big boys� to the rest of the market. But then the combination of an options expiration, more turmoil in Iran, problems with Google, another terrorist tape, oil�s surge, and the battle of the curve (the yield curve, that is), allowed the bears to simply overrun their opponents.
Oil prices were also at the top of the list as far as Friday�s difficulties are concerned. Obviously the unrest in Iran led to some buying. However, another threatening audio tape from Al-Zawahiri also raised some concern over terrorism and the supply of oil. And speaking of supply, a report made the rounds on Friday showing that Kuwait�s proven reserves (and how exactly do you �prove� reserves of crude oil again?) were only about one-half of the published levels. So with the question of the day being, �how much oil does the world really have?� traders pushed crude futures up $1.52 to $68.35. The move capped off a strong move up in oil as crude finished the week with gains of almost 7%.
So with Bin Laden, oil, earnings, and worries over war in Iran putting a dark cloud over the market, the bulls noted that it was an options expiration day and simply headed home early. In sum, the price move was severe, volume was very strong, and breadth was horrible. The good news however, is that the combination of fear and heavy selling may have produced a washout. Only time will tell for sure, but short-term traders like to identify days that are too one-sided as potential reversal opportunities. So while Friday was no fun at all, it was definitely a one-sided affair, which means that we probably shouldn�t abandon ship just yet.
Turning to this morning, there isn�t any economic news before the bell, but we will get the report on the Leading Economic Indicators at 10:00 eastern. And in looking ahead, Tuesday�s economic calendar is quiet, while Wednesday brings a report on Existing Home Sales. Then on Thursday we�ll get Durable Goods and the Help Wanted Index, and finally, on Friday, the report on the fourth quarter�s GDP will be released along with New Home Sales.
In looking at today�s market, so far at least, stocks have a fairly firm feel to them. An upbeat forecast on the economy from NABE as well as strong earnings from Ford is helping set the stage for an upbeat mood before the open.
Running through the pre-game numbers, Gold is currently trading higher by $4.80 to $558.8 on reports out this morning forecasting the yellow metal at $800 soon, Oil is pulling back by -$0.47 to $68.01, Natural Gas is trading lower at $8.63, the yield curve is just barely positive with the 2-yr at 4.37% while the 10-yr is at 4.38%, and stock futures are rebounding a bit (Dow +21, S&P +3.40, NASDAQ +6).
So with the bulls looking for a bounce to start things off today, the question of the day is if Friday�s drubbing will carry over or wind up being a one-day wonder?
Stocks "In Play" This Morning:
F � Reports $0.26 vs. $0.01, Revenues $47.5B vs. $41.8B, will announce restructure
BAC � Reports $0.94 vs. $1.02
ABS � Confirms sale to consortium
C � Downgraded at UBS
FCX � Downgraded at Merrill
UNP � Morgan Stanley recommends overweighting rails � UNP is favorite
FSL � Replaces INTC on Top Picks list at UBS
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: INTC
To see David Moenning�s Trading Record, his (Strong Buy) List, or the rank for any Top Guns Stocks, visit: http://www.AnotherWinningTrade.com/SI
After Friday�s thrashing, it looks like we�ve got a brand new ballgame on our hands. The bulls clearly ran away with the game for the first couple of weeks of the New Year, but if nothing else, Friday�s drop of -200 points showed that the bears are still in the game and are in fact, a force to be reckoned with. The worst one-day drubbing in almost three years pushed the venerable DJIA into the red for the year and took the returns on the other major indices back down to levels where the outcome of this year�s game may suddenly be in question.
The list of reasons for Friday�s setback is rather long but the actual catalyst for the big drop is not entirely clear. Disappointing earnings from Dow heavyweights Citigroup and GE certainly set the stage in the pre-market as traders extrapolated earnings from the �big boys� to the rest of the market. But then the combination of an options expiration, more turmoil in Iran, problems with Google, another terrorist tape, oil�s surge, and the battle of the curve (the yield curve, that is), allowed the bears to simply overrun their opponents.
Oil prices were also at the top of the list as far as Friday�s difficulties are concerned. Obviously the unrest in Iran led to some buying. However, another threatening audio tape from Al-Zawahiri also raised some concern over terrorism and the supply of oil. And speaking of supply, a report made the rounds on Friday showing that Kuwait�s proven reserves (and how exactly do you �prove� reserves of crude oil again?) were only about one-half of the published levels. So with the question of the day being, �how much oil does the world really have?� traders pushed crude futures up $1.52 to $68.35. The move capped off a strong move up in oil as crude finished the week with gains of almost 7%.
So with Bin Laden, oil, earnings, and worries over war in Iran putting a dark cloud over the market, the bulls noted that it was an options expiration day and simply headed home early. In sum, the price move was severe, volume was very strong, and breadth was horrible. The good news however, is that the combination of fear and heavy selling may have produced a washout. Only time will tell for sure, but short-term traders like to identify days that are too one-sided as potential reversal opportunities. So while Friday was no fun at all, it was definitely a one-sided affair, which means that we probably shouldn�t abandon ship just yet.
Turning to this morning, there isn�t any economic news before the bell, but we will get the report on the Leading Economic Indicators at 10:00 eastern. And in looking ahead, Tuesday�s economic calendar is quiet, while Wednesday brings a report on Existing Home Sales. Then on Thursday we�ll get Durable Goods and the Help Wanted Index, and finally, on Friday, the report on the fourth quarter�s GDP will be released along with New Home Sales.
In looking at today�s market, so far at least, stocks have a fairly firm feel to them. An upbeat forecast on the economy from NABE as well as strong earnings from Ford is helping set the stage for an upbeat mood before the open.
Running through the pre-game numbers, Gold is currently trading higher by $4.80 to $558.8 on reports out this morning forecasting the yellow metal at $800 soon, Oil is pulling back by -$0.47 to $68.01, Natural Gas is trading lower at $8.63, the yield curve is just barely positive with the 2-yr at 4.37% while the 10-yr is at 4.38%, and stock futures are rebounding a bit (Dow +21, S&P +3.40, NASDAQ +6).
So with the bulls looking for a bounce to start things off today, the question of the day is if Friday�s drubbing will carry over or wind up being a one-day wonder?
Stocks "In Play" This Morning:
F � Reports $0.26 vs. $0.01, Revenues $47.5B vs. $41.8B, will announce restructure
BAC � Reports $0.94 vs. $1.02
ABS � Confirms sale to consortium
C � Downgraded at UBS
FCX � Downgraded at Merrill
UNP � Morgan Stanley recommends overweighting rails � UNP is favorite
FSL � Replaces INTC on Top Picks list at UBS
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: INTC
To see David Moenning�s Trading Record, his (Strong Buy) List, or the rank for any Top Guns Stocks, visit: http://www.AnotherWinningTrade.com/SI
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