David Moenning's Daily State of the Markets: 01/10

Bears Get Jobbed

Good morning. The bears wound up missing an opportunity yesterday and it was none other than Apple�s Steve Jobs that was to blame. In reality, the bears had things lined up nicely for them in the early going Tuesday. There was chaos in the emerging markets thanks to Venezuela�s plans to nationalize a phone company, oil was sinking again and causing some concern in the hedge fund community, Sprint had disappointed badly, and there was clearly some hesitancy in the bull camp due to the oncoming earnings parade.

So with buyers on the sidelines, an overbought market that was clearly due for a pullback, and the emerging markets providing the excuse du jour for some selling, it looked like the day could get ugly in a hurry.

The overall sentiment seemed to be negative as well. Even falling oil prices were suddenly being viewed as a bad thing. While it would be natural to assume that the drop in crude (oil futures dropped below $54 intraday before reversing) would help both the consumer and the economy, the thinking lately is that it is a decline in demand, stemming from a slowdown in the economy that is to blame for falling oil prices.

This theory seemed to be gaining some traction in the hedge fund community and talk of the energy/commodities trade being unwound started to make the rounds.

But, despite all the hype and expectations, Apple�s Steve Jobs managed to save the day as he blew people away with his introduction of the soon to be released Apple iPhone. Everyone expected the new product to be a combination iPod, mobile phone, and internet connectivity device. And everybody assumed it would be cool because that�s what Apple is known for. But, almost no one expected it to be THAT cool. And in short, the excitement over the company�s newfound potential (conservative projections call for sales of 10 million units at $499 - $599 in 2007) spilled over into tech and then to the overall market.

Thus, the bears once again went home shaking their heads and disappointed. Sure, the blue chip indices finished modestly in the red. But, even the most ardent bears knew that they had booted the opportunity to get something going to the downside.

But, today is another day and at least in the early going, it looks like the bears may be stepping up to the plate once again. Most of yesterday�s negative factors have resurfaced and falling prices in overseas markets seem to be spilling over into the U.S.

Running through the pre-game indicators, the foreign markets are all sporting decent-sized declines this morning. Japan and Hong Kong were lower by -1.7%, France is off by -.6%, Germany is down -1%, and the UK is sitting with losses of -0.5%. Gold futures are lower this morning with the last trade off $2.80 to $612.20. In the oil pits, crude futures are sliding again with the latest quote showing the February futures contract down by $0.57 to $55.07. Interest rates are holding steady this morning with the 10-year currently trading with a 4.67% yield. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open lower. The Dow futures are currently lower by 45 points; the S&Ps are 6 points under breakeven, while the NASDAQ looks to be about 10 points below fair value at the moment.

Stocks �In Play� This Morning:

Intl Business Machines (IBM) � Downgraded at AG Edwards
Mills Corp (MLS) � Downgraded at BofA
Viacom (VIA.B) � Named Top Pick for 2007 at Bear Stearns
Choice Hotels (CHH) � Upgraded at Bear Stearns
Boeing (BA) � Named Top Pick for 2007 at Bernstein
Apple Inc (AAPL) � Price Target increased at Deutsche Bank
Ericsson (ERIC) � Upgraded at Deutsche Bank
Teradyne (TER) � Upgraded at Friedman, Billings
Research in Motion (RIMM) � Mentioned positively at Goldman Sachs
Motorola (MOT) � Downgraded at Jefferies
McKesson (MCK) � Upgraded at Merrill Lynch
Legg Mason (LM) � Upgraded at Merrill Lynch

** For More of David Moenning�s Market Analysis, Stock Portfolios, and Trading Ideas, visit: a target=_blank href="http://www.www.TopGunsTrading.com">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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