David Moenning Daily State of the Markets 1/10
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Rule of Round Numbers
Here we go again. Every time the Dow crosses a round number, all anybody wants to talk about is the significance of the move through the number. Yes, it was nice to see the DJIA close above 11,000. Yes, it was the first time that this has happened since June 7, 2001. And yes, for some strange reason, this type of move does seem to boost traders� spirits.
But, in reality, unless an index can move above a key resistance zone on really big volume and then, more importantly, STAY there for a while, the move is usually viewed with a bit of skepticism by traders. So don�t be surprised if the move is �tested� in rather short order by the opposing team.
The more important aspect of Monday�s move higher was the fact that it was the fifth straight day of gains. And for the first time since the opening minutes of the New Year, the bulls actually saw their resolve tested by a couple sell programs yesterday. So from where we sit anyway, the fact that the bulls were able to take the punch and then finish strong was actually more important than the Dow�s crossing of 11,000.
Stocks continued to benefit yesterday from the growing confidence that the Fed is about done and thus, will not become an antagonist to the market or the economy. In addition, the bulls enjoyed the tailwinds of a GM actually going higher for a change, upgrades to some high-profile brokerage firms, and lower oil prices. Taken individually, none of these items will usually cause much of a stir. But with the DJIA so near the magical 11,000 mark, they combined to add fuel to the bull�s fire.
In sum, traders appear to have entered 2006 with a healthy dose of optimism fueled by the outlook for the Fed and earnings. However, after five straight up days, we should recognize that stocks are now overbought from both a short and intermediate-term standpoint, and that the bears are probably anxious to come off the bench and get in the game.
Turning to this morning, once again there is no economic data to guide the markets before the opening bell. However, a crummy report by Alcoa to kick off the earnings season, weakness in bonds, and some declines overseas has stocks looking to open to the downside.
So after vaulting 11,000 and enjoying a fine start to the year, the question of the day will be how the bulls react to their first real test.
Stocks "In Play" This Morning:
AMD � Upgraded to outperform at Piper
HD � To purchase HUG for $46.50
AMAT � Upgraded to overweight at MWD]
ABC � Raises guidance for Q4 and 2006
AA � Reported $0.35 vs. $0.37, downgraded by UBS and CIBC
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: AMAT, AMD
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
Here we go again. Every time the Dow crosses a round number, all anybody wants to talk about is the significance of the move through the number. Yes, it was nice to see the DJIA close above 11,000. Yes, it was the first time that this has happened since June 7, 2001. And yes, for some strange reason, this type of move does seem to boost traders� spirits.
But, in reality, unless an index can move above a key resistance zone on really big volume and then, more importantly, STAY there for a while, the move is usually viewed with a bit of skepticism by traders. So don�t be surprised if the move is �tested� in rather short order by the opposing team.
The more important aspect of Monday�s move higher was the fact that it was the fifth straight day of gains. And for the first time since the opening minutes of the New Year, the bulls actually saw their resolve tested by a couple sell programs yesterday. So from where we sit anyway, the fact that the bulls were able to take the punch and then finish strong was actually more important than the Dow�s crossing of 11,000.
Stocks continued to benefit yesterday from the growing confidence that the Fed is about done and thus, will not become an antagonist to the market or the economy. In addition, the bulls enjoyed the tailwinds of a GM actually going higher for a change, upgrades to some high-profile brokerage firms, and lower oil prices. Taken individually, none of these items will usually cause much of a stir. But with the DJIA so near the magical 11,000 mark, they combined to add fuel to the bull�s fire.
In sum, traders appear to have entered 2006 with a healthy dose of optimism fueled by the outlook for the Fed and earnings. However, after five straight up days, we should recognize that stocks are now overbought from both a short and intermediate-term standpoint, and that the bears are probably anxious to come off the bench and get in the game.
Turning to this morning, once again there is no economic data to guide the markets before the opening bell. However, a crummy report by Alcoa to kick off the earnings season, weakness in bonds, and some declines overseas has stocks looking to open to the downside.
So after vaulting 11,000 and enjoying a fine start to the year, the question of the day will be how the bulls react to their first real test.
Stocks "In Play" This Morning:
AMD � Upgraded to outperform at Piper
HD � To purchase HUG for $46.50
AMAT � Upgraded to overweight at MWD]
ABC � Raises guidance for Q4 and 2006
AA � Reported $0.35 vs. $0.37, downgraded by UBS and CIBC
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: AMAT, AMD
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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