David Moenning's Daily State of the Markets 10/04

Soaring? Not Exactly

Good morning. Yesterday�s market headline from AP read, �Dow soars to new high.� And while the part about the new high was certainly accurate, we are going to take exception with the use of the word �soars.� While it was true that the Dow did indeed FINALLY eclipse the 11,723 level by closing at 11,727, �soaring� isn�t the first word that comes to mind in describing yesterday�s action.

Sure, you can call me cynical, but when the market makes headlines by breaking to heights never before seen, I would like to see some oomph behind the move. Something that tells me that the bulls are clearly in charge and that there are more gains ahead. For example, I�d like to see all the indices marching merrily higher, arm in arm to the Promised Land of new highs. I�d like to see impressive volume, stellar breadth, and stocks closing at their highs of the day. This is the stuff that bull runs are made of.

But instead, yesterday the Dow rose 57 points, or 0.49%, while the S&P 500 and NASDAQ recorded gains that were half that and, believe it or not, the NYSE, Russell 2000, S&P Small Cap, and S&P Mid Caps, ALL finished the day with losses!

What�s more, the volume was flat out unimpressive, the Dow finished almost 40 points off the high (we can blame Intel for the late day selloff) and there were only 128 more advancing issues than decliners. So, is �soaring� REALLY the word you want to use to describe this strange session? And while we don�t want to begrudge the CNBC commentators their fun (after all, they have been busy creating all sorts of ways to shout about the new high), in short, this was far from the type of day that the word �soaring� might imply.

However, we should keep in mind that Rome wasn�t built in a day. And as such, we will be happy to give the bulls the benefit of the doubt and maybe even a little time to get their act together. But with oil falling to 10-month lows � the November contract fell -$2.35 to close at $58.68 � we might have expected the bulls to pack a little more punch on this historic day.

And for those of you keeping score at home, the S&P remains nearly 15% beneath its old high, which was set on March 23, 2000, while the NASDAQ needs to climb another 2805 points or 125% in order to surpass the bubble high of March 10, 2000.

Turning to this morning, all eyes will be on the Fed Chairman this afternoon as Mr. Bernanke will speak to the Washington Economic Club at 12:45 ET. On the news front, the ADP Employment Report, which is a precursor to the Government�s Employment report scheduled for Friday, came in a bit weaker than expected. The report showed a gain of 78,000 jobs versus the Dow Jones consensus for an increase of 125,000 new jobs. In addition, this morning, Wal-Mart lowered its September sales estimates, which were released on Saturday, from 1.8% growth to just 1.3%. Stocks have moved modestly lower on these items.

Running through the pre-game indicators, overseas markets are mostly higher. Gold futures are rebounding a bit after yesterday�s drubbing and are quoted at $583.50 right now. Crude oil futures are also moving up a little this morning and are currently ahead by $0.46 at $59.14. Interest rates are a little lower on the ADP report, with the 2-year currently quoted at 4.65% while the 10-yr is trading with a yield of 4.60% right now. And finally, with an hour before the bell, stock futures in the U.S. are a trading a bit below fair value. The Dow futures are currently off by 12, the S&Ps are up down -0.80, and the NASDAQ is hovering around unchanged at the moment.

Stocks �In Play� This Morning:

Toyota Motor (TM ) � Upgraded at BofA
Ford (F) � Downgraded at Bear Stearns
General Motors (GM) � Upgraded at Bear Stearns
Tivo (TIVO) � Downgraded at Bear Stearns
United Dominion Realty (UDR) � Upgraded at Credit Suisse
Deutsche Telekom (DT) � Downgraded at Deutsche Bank
Symantec (SYMC) � Downgraded at Friedman Billings
Tyson Foods (TSN) � Downgraded at JP Morgan
Comcast (CMCSA) � Downgraded at RBC Capital
Verizon (VZ) � Downgraded at RBC Capital
WCI Communities (WCI) � Downgraded at UBS
Wal-Mart (WMT) � Revises September Sales estimates lower

Long positions in stocks mentioned: none

** 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.

www.TopGunsTrading.com

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