David Moenning's Daily State of the Markets:

Not Enough

Good morning. A slew of M&A activity, including the largest LBO ever, another drop in oil prices, and lower interest rates weren�t enough to convince the bulls to push the Dow to a sixth straight record close yesterday. Although the total capital committed by firms looking to do deals was a mind-boggling $50 Billion on Monday, the bulls appeared content to rest on their laurels and let the market drift a little lower.

Even the economic news failed to encourage any real buying. The Index of Leading Economic Indicators, which is actually a better indicator of current economic conditions than it is a predictor of things to come, came in right on target with a gain of +0.2%. However, the good news is the September reading was revised upward to +0.4% from +0.1%. And on a year-over-year basis, the Leading Index has increased 1%, which is indicative of sluggish growth going forward. While these are not exactly inspiring numbers, they are consistent with the current outlook for a Goldilocks economy.

In reviewing yesterday�s trading session, stocks began the day on a weak note and basically never recovered. Overseas markets were lower across the board on worries over exports in relation Friday�s weak housing data. And while this may have been more of an excuse to take some profits than anything else, traders in the U.S. were not able to overcome the negative overhang.

In short, despite an impressive day on the deal front, there didn�t appear to be much in the way of buying interest. Let�s fact it; stocks have enjoyed a stellar run for the past 4 months and with the Thanksgiving Holiday quickly approaching, traders may be more interested in making travel plans than doing a lot of buying at the moment.

Although volume wasn�t terribly light yesterday, we should expect the pace of trading to start to slow later today and into Wednesday. While the days before and after Thanksgiving have a strong seasonal track record, we wouldn�t be surprised to see the bulls take a little break for the rest of the week.

Turning to this today�s session, there is no economic news scheduled for release today. However, Fed Governor Jeffrey Lacker, who has voted to raise rates at the last two Fed meetings, is sure to provide a headline or two on the vagaries of inflation during his speech at noon.

Running through the rest of the pre-game indicators, the major overseas markets have reversed yesterday�s decline and today are a bit higher. Gold futures are moving up this morning and are quoted at $626.70 right now. Crude futures are also moving higher this morning, with the latest quote showing the December contract up $0.48 to $59.28. Interest rates are holding steady so far with the 2-year currently quoted at 4.78% while the 10-yr is trading with a yield of 4.60% right now. And finally, with about an hour before the bell, stock futures in the U.S. are looking a little higher. The Dow futures are currently ahead of fair value by about 7 points, the S&Ps are up a fraction, and the NASDAQ looks to be about 3 points ahead of fair value at the moment.

Stocks �In Play� This Morning:

Lam Research (LRCX) � Downgraded at AG Edwards
American Intl Group (AIG) � BofA begins coverage with Buy
Blackrock (BLK) � BofA begins coverage with Buy
Dow Jones (DJ) � Bear Stearns begins coverage with Peer Perform
Phelps Dodge (PD) � Downgraded at Citigroup, Stifel Nicolaus, BMO Capital
Bank of New York (BK) � Downgraded at Credit Suisse
Verizon (VZ) � Upgraded at Credit Suisse
Sierra Health (SIE) � Upgraded at Goldman Sachs
Checkpoint Software (CHKP) � Upgraded at JP Morgan
Medtronic (MDT) � Upgraded at JP Morgan, ThinkEquity
Juniper Networks (JNPR) � Upgraded at JP Morgan
Dow Chemical (DOW) � Downgraded at Merrill Lynch
Host Hotels (HST) � Downgraded at Merrill Lynch
Walgreen (WAG) � Downgraded at Morgan Stanley
Adobe Systems (ADBE) � Upgraded at Wachovia

Long positions in stocks mentioned: BSC, JPM, GS, MS, BK, 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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