David Moenning's Daily State of the Markets: 11/10
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Good morning and a happy Friday to all. As we have often stated, the key to long-term success in the stock game is to keep portfolios "in tune" with the market�s song. And the key to staying in tune is to be able to identify the focal point of traders on an ongoing basis. The thinking is that, regardless of the logic involved, if one can recognize what traders are most concerned about then there shouldn�t be any surprises when the market makes its move. And frankly, this is one of the primary reasons behind the production of this missive each day.
But, every once in a while, the market makes a move that appears to have no reasonable backing. For example, the media�s reporting on yesterday�s action pointed to the idea that the Democrats taking control of both the House and the Senate was the reason for the drop of 73 points. The popular press also suggested that the University of Michigan�s Consumer Sentiment Index, which came in below expectations, as well as a jump in oil prices was also to blame for the decline.
While these excuses for the drop certainly sound logical, upon further review, they don�t really hold up. You see, if an economic report is going to be the reason for a decent-sized move in the market, then the report�s impact is usually felt immediately following the release. And this just wasn�t the case yesterday.
As for the excuse that the big bad Democrats are going to be bad for businesses other than Defense and Drugs; wouldn�t this have been a problem on Wednesday when it became apparent that control of Congress was about to shift? Let�s remember that the stock market tends to discount the future. And since even an amateur political analyst could see on Wednesday that the Republicans were probably going to lose the Virginia senate seat, this would seem to run counter to the market�s move to new all-time high territory.
No, yesterday�s drop, which seemed to come out of nowhere, didn�t really have, or even need, a reason. Let�s keep in mind that stocks have enjoyed a stellar move since the middle of August and that the advance has been a one-way affair without so much as a couple scary down days to keep the game interesting. And while we did have a string of six straight declines in the Dow recently, there was little, if any, selling pressure seen. So, it shouldn�t surprise anyone that the bulls might need to take a rest in here somewhere or that the bears might want to at least show up for the contest from time to time.
So, what do we focus on going forward? In the short-term, we�ll be looking to see how the two teams react today and Monday. One can easily make the argument that it�s time for a more constructive corrective phase, but then again, there is always the possibility that yesterday�s pullback was just a blip in the bullish action. So watch the support levels, the volume, and the action of the leaders for tells as to what will come next.
Turning to this morning, there is no economic data scheduled for release before the bell although we will get to hear a speech from Mr. Bernanke just before the bell. In the early going, stocks are waffling around breakeven and clearly looking for direction.
Running through the rest of the pre-game indicators, the major overseas markets are a little lower this morning with most indices hovering just below breakeven. Gold futures are moving lower so far and are quoted at $632.20 right now. Crude futures are heading south at the moment, with the latest quote showing oil down $0.64 to $60.52. Interest rates are showing little movement this morning with the 2-year currently quoted at 4.74% while the 10-yr is trading with a yield of 4.64% right now. And finally, with about an hour before the bell, stock futures in the U.S. are flat-lining. The Dow futures are currently unchanged, the S&Ps are off by a point, and the NASDAQ looks to be about 3 points below fair value at the moment.
Stocks �In Play� This Morning:
Goodrich (GR) � Mentioned positively in Business Week
Hovnanian (HOV) � Mentioned positively in Business Week
PetroChina (PTR) � Mentioned positively in Business Week
Circuit City (CC) � Mentioned positively at Prudential
Best Buy (BBY) � Mentioned positively at Prudential
Nvidia (NVDA) � Reported $0.39 vs. $0.34, Downgraded at Stifel, Upgraded at BMO Capital
Hewitt Associates (HEW) � Reported $0.21 vs. $0.26, Revenues $727.6M vs. $720.4M
Cardinal Health (CAH) � Downgraded at Citigroup
F5 Networks (FFIV) � Downgraded at Citigroup
Urban Outfitters (URBN) � Citigroup raises price target
Kohls (KSS) � Estimates reduced at Deutsche Bank, Piper raises price target
Nordstrom (JWN) � Upgraded at Goldman Sachs
American Tower (AMT) � Removed from Conviction Buy List at Goldman Sachs
Vodafone (VOD) � Upgraded at JP Morgan
JC Penney (JCP) � Piper Jaffray raises price target
Deutsche Telekom (DT) � Downgraded at UBS
Adobe Systems (ADBE) � UBS reiterates Buy rating
Long positions in stocks mentioned: GS, JCP, CC, JWN, AMT, ADBE
** 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 and a happy Friday to all. As we have often stated, the key to long-term success in the stock game is to keep portfolios "in tune" with the market�s song. And the key to staying in tune is to be able to identify the focal point of traders on an ongoing basis. The thinking is that, regardless of the logic involved, if one can recognize what traders are most concerned about then there shouldn�t be any surprises when the market makes its move. And frankly, this is one of the primary reasons behind the production of this missive each day.
But, every once in a while, the market makes a move that appears to have no reasonable backing. For example, the media�s reporting on yesterday�s action pointed to the idea that the Democrats taking control of both the House and the Senate was the reason for the drop of 73 points. The popular press also suggested that the University of Michigan�s Consumer Sentiment Index, which came in below expectations, as well as a jump in oil prices was also to blame for the decline.
While these excuses for the drop certainly sound logical, upon further review, they don�t really hold up. You see, if an economic report is going to be the reason for a decent-sized move in the market, then the report�s impact is usually felt immediately following the release. And this just wasn�t the case yesterday.
As for the excuse that the big bad Democrats are going to be bad for businesses other than Defense and Drugs; wouldn�t this have been a problem on Wednesday when it became apparent that control of Congress was about to shift? Let�s remember that the stock market tends to discount the future. And since even an amateur political analyst could see on Wednesday that the Republicans were probably going to lose the Virginia senate seat, this would seem to run counter to the market�s move to new all-time high territory.
No, yesterday�s drop, which seemed to come out of nowhere, didn�t really have, or even need, a reason. Let�s keep in mind that stocks have enjoyed a stellar move since the middle of August and that the advance has been a one-way affair without so much as a couple scary down days to keep the game interesting. And while we did have a string of six straight declines in the Dow recently, there was little, if any, selling pressure seen. So, it shouldn�t surprise anyone that the bulls might need to take a rest in here somewhere or that the bears might want to at least show up for the contest from time to time.
So, what do we focus on going forward? In the short-term, we�ll be looking to see how the two teams react today and Monday. One can easily make the argument that it�s time for a more constructive corrective phase, but then again, there is always the possibility that yesterday�s pullback was just a blip in the bullish action. So watch the support levels, the volume, and the action of the leaders for tells as to what will come next.
Turning to this morning, there is no economic data scheduled for release before the bell although we will get to hear a speech from Mr. Bernanke just before the bell. In the early going, stocks are waffling around breakeven and clearly looking for direction.
Running through the rest of the pre-game indicators, the major overseas markets are a little lower this morning with most indices hovering just below breakeven. Gold futures are moving lower so far and are quoted at $632.20 right now. Crude futures are heading south at the moment, with the latest quote showing oil down $0.64 to $60.52. Interest rates are showing little movement this morning with the 2-year currently quoted at 4.74% while the 10-yr is trading with a yield of 4.64% right now. And finally, with about an hour before the bell, stock futures in the U.S. are flat-lining. The Dow futures are currently unchanged, the S&Ps are off by a point, and the NASDAQ looks to be about 3 points below fair value at the moment.
Stocks �In Play� This Morning:
Goodrich (GR) � Mentioned positively in Business Week
Hovnanian (HOV) � Mentioned positively in Business Week
PetroChina (PTR) � Mentioned positively in Business Week
Circuit City (CC) � Mentioned positively at Prudential
Best Buy (BBY) � Mentioned positively at Prudential
Nvidia (NVDA) � Reported $0.39 vs. $0.34, Downgraded at Stifel, Upgraded at BMO Capital
Hewitt Associates (HEW) � Reported $0.21 vs. $0.26, Revenues $727.6M vs. $720.4M
Cardinal Health (CAH) � Downgraded at Citigroup
F5 Networks (FFIV) � Downgraded at Citigroup
Urban Outfitters (URBN) � Citigroup raises price target
Kohls (KSS) � Estimates reduced at Deutsche Bank, Piper raises price target
Nordstrom (JWN) � Upgraded at Goldman Sachs
American Tower (AMT) � Removed from Conviction Buy List at Goldman Sachs
Vodafone (VOD) � Upgraded at JP Morgan
JC Penney (JCP) � Piper Jaffray raises price target
Deutsche Telekom (DT) � Downgraded at UBS
Adobe Systems (ADBE) � UBS reiterates Buy rating
Long positions in stocks mentioned: GS, JCP, CC, JWN, AMT, ADBE
** 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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