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Traders obviously like the morning data and it appears that the S&P is breaking out...But none of the other indices are following suit Oct 5, 2010
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Anyone else feel the pervasive negativity this morning? It's as if everybody already knows that all the news will be bad. Hmmm... Aug 31, 2010
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We're watching the 8/24 gap on the SPX. Once filled, it would be a logical spot for bears to reload some shorts. But, if the bulls can hold. Aug 26, 2010
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A Look Inside
Daily State of the Markets
Monday Morning – October 25, 2010
Good morning. On one hand, days in which data input is limited or nonexistent can be viewed as a waste of time as these sessions are about as interesting as watching paint dry. On the other hand however, when traders are left to their own devices, we get a rare look at what's really going inside their heads. Cutting to the chase, it would appear that in looking at Friday's action, those in the trenches at the corner of Broad and Wall are still leaning the bulls' way.
By most counts, one might have expected to see stocks pull back by now. After all, the S&P is up about 13% from its late-August lows and the DJIA finds itself just 73 points away from the high water mark for the current bull market. The indices have been overbought for the better part of two months, market sentiment has become fairly rosy, and the current joyride to the upside is based primarily on hope. As such, a pause that refreshes would be normal right about now.
However, much to the chagrin of anyone thinking that Wall Street is a two-way street, a pullback of even -1.5% has proved elusive and the S&P hasn't spent more than a day below its 10-day moving average in the last 37 trading sessions. Thus, it is easy to see that this has indeed been an impressive run.
What about that overbought condition, you ask? Doesn't that tell us to be careful and that a correction is imminent? Well, one of THE most important lessons I have learned over the past 25 years is that there are two kinds of overbought conditions. The first is the kind that most investors are familiar with - a sign that a pullback is likely. This type of overbought condition occurs when the market is in what we'd call a two-steps-forward-one-step-back type of mode. In this case, the market rallies for a while then pulls back a bit in order to give the buyers a rest. And this is how most traders I've come in contact with over years interpret the various oscillators used to identify an overbought condition.
However, it is important to recognize that there is another kind of overbought condition. When a market becomes overbought (or oversold) - meaning that an indicator such as your standard stochastic (%K: 14, %K: 1, %D: 3, with 80/20 bands) is above the upper band - and then stays overbought for an extended period of time, it is actually a sign of strength. In other words, a market that can't move away from an overbought condition is clearly bullish. And the best way to play such a move is to either get in and stay in, or buy any dips that come along.
Let's face it; buying any and all dips since the beginning of September has been a profitable venture. The question, of course, is how long the current run for the roses will last. While my crystal ball is MIA at the moment, my view is that Friday's action suggests traders have not given up on the heads-stocks-win, tails-stocks-win-too trade as just about everything except the DJIA was up handsomely - and without any news to drive prices higher.
So, whether or not you agree with the thinking behind the move (blue skies are ahead thanks to Bernanke & Co and the mid-term elections), it does appear that traders and fund managers (remember, a big batch of mutual funds have 10/31 fiscal year-ends) are still thinking that it is best to run with the bulls.
Turning to this morning... Stocks are looking to open higher on the back of the G20 meeting and the corresponding drop in the dollar.
On the economic front... We do not have any data to review before the bell, we will get the report on Existing Home Sales at 10:00 am eastern.
Finally, be sure to take time to breathe today...
Pre-Game Indicators
Here are the important indicators we review each morning before the opening bell...
Company
Symbol
EPS
Estimate
* Report includes items that make comparisons to the consensus estimate questionable
Wall Street Research Summary
Upgrades:
Downgrades:
Long positions in stocks mentioned: MSFT
For more "top stock" portfolios and research, visit TopStockPortfolios.com
The opinions and forecasts expressed are those of David Moenning, founder of TopStockPortfolios.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. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of TopStockPortfolios and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Stocks should always consult an investment professional before making any investment.
Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.
The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.
The information contained in our websites and TopStockPortfolios publications is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer.
Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.
Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.
Disclosure: Long MSFT
The QE2 Math
Daily State of the Markets
Friday Morning – October 22, 2010
Good morning. Sorry to complain on a Friday morning, but one of my biggest pet peeves with the popular market media is their inability to explain why things happen in the stock market. But then again, I guess I shouldn't complain too loudly as this does give us a raison d’être. In any event, I found it exceptionally odd that most reports of Thursday's market activity failed to even mention, let alone explain, the fairly obvious reversal of fortunes that occurred.
Stocks initially moved higher Thursday morning as worries over the global economy continued to recede after China's GDP data, the PMI numbers out of Europe, and some rather benign reports on the state of the U.S. economy. Don't get me wrong; none of the data represented anything to get excited about. But the overall tone seemed to suggest that things were moving forward and there was nary a whiff of anything even remotely related to a double-dip.
So, with the heads-stocks-win, tails-stocks-win-too trade still going strong, it wasn't surprising to see the animal spirits heat up again in the early going - so much so that the venerable DJIA even played a quick game of tag with its cycle highs. And for a while there, anyone brave enough to be thinking about the glass being anything but overflowing was probably feeling like they'd been hit by a train.
But then it happened. Maybe it was the fact that the Dow had matched its closing high of April 26th. Maybe it was the jitters over the potential for more currency sparring. Maybe it was the rally in the dollar. Or maybe it was worry over the mortgage mess. Regardless of the reasoning behind the move, the big gain started to slip away and before CNBC could cue up the celebratory ticker about the Dow's recent accomplishment, the bears had returned.
For those of you keeping score at home, we're going to suggest that the movement in the greenback was once again part and parcel to the decline in the stock market. While it hasn't gotten much play in the press, it is clear to anyone watching such things that when the dollar goes down, traders buy the risk assets and vice versa. So, with the dollar rising steadily, the DJIA found itself down more than 40 points just after lunchtime.
But perhaps the bigger culprit behind the rally-dive-recover action seen Thursday was the math involving QE II. So let's see if we can make sense of the formula. A rising dollar plus higher bond yields plus decent economic data plus St. Louis Fed President Bullard's comments about quantitative easing (Bullard said Thursday that there has been no decision yet on the launch of QE II and that the FOMC would likely start with $100 billion and see how it goes) equals, yep, you guessed it; uncertainty.
However, by the time the closing bell rang, the rose colored glasses had been repositioned and everything was once again right with the world. And although the bear camp could be heard yammering on about Thursday being some sort of a reversal day (but clearly not a "key reversal" day) we couldn't help but wonder if trees were actually going to grow to the sky this time around.
Turning to this morning... Things are fairly quiet in the pre-market at this point. However, should take note of the big pop in interest rates this morning as the yield on the 10-year has popped up to 2.57%. And while the earnings parade marches on, there is no economic data on the calendar today.
Finally, best of luck on this Friday and be sure to enjoy the weekend!
Pre-Game Indicators
Here are the important indicators we review each morning before the opening bell...
Company
Symbol
EPS
Estimate
Company
Symbol
EPS
Estimate
* Report includes items that make comparisons to the consensus estimate questionable
Wall Street Research Summary
Upgrades:
Downgrades:
Long positions in stocks mentioned: RVBD
For more "top stock" portfolios and research, visit TopStockPortfolios.com
The opinions and forecasts expressed are those of David Moenning, founder of TopStockPortfolios.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. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of TopStockPortfolios and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Stocks should always consult an investment professional before making any investment.
Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.
The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.
The information contained in our websites and TopStockPortfolios publications is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer.
Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.
Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.
Disclosure: Long RVBD
One-Way Street?
Daily State of the Markets
Thursday Morning – October 21, 2010
Good morning. If you classify yourself as a bear these days, you probably found yourself cursing, pounding the table, and throwing things at your screen by the time the lunch bell rang yesterday. After moving straight up for more than a month and a half, logic would seem to dictate that after a day like Tuesday, in which the indices were shellacked on a new worry relating to the credit crisis, the glass-is-half-empty crowd was likely to run with the ball for a while. However, by the time the closing bell rang on Wednesday, it became apparent that Wall Street was once again a one-way street.
Remarkable as it may be, this market, like the energizer bunny, just seems to keep on going (and going... and going). And what is perhaps most impressive is the fact that our heroes in horns didn't even need a reason to reverse Tuesday's big dive. (Feel free to insert the Blazing Saddles rendition of "Reasons? Reasons? We don't need no..." here.) Nope, just knock the dollar back down and this bull is good to go.
As long-time readers know, I have a penchant for needing to know the 'reason' behind a move. I'm of the mind that stocks don't just make triple-digit moves in either direction without a reason. But, try as I might, I couldn't find a specific catalyst for yesterday's turnaround. However, part of the rally may have been attributed to the fact that there was a fair amount of talk about the fact that the effort to force Bank of America to repurchase $47 billion worth of bad mortgages (commonly referred to as a push back) may not come to fruition, or may take years to accomplish.
Next up there was word that things weren't as bad in the banking industry as had been feared as Wells Fargo (WFC) had some good things to say about default rates. And although BAC kept the banking index in the red on the day, most of the names made impressive rebounds on this news (well, that and earnings out of Goldman Sachs).
In addition, we heard a lot of talk about China yesterday, which seemed to be focused on the idea that economists don't expect a long tightening campaign. The fear on Tuesday had been that with officials hitting the brakes on one of the world's fastest growing economies, the rest of the world was sure to suffer. But, with economists suggesting that the tightening campaign is likely to be short and sweet, traders returned their attention to other matters.
The combination of talk about China and the growing expectations for the Fed to implement QE II, sent the dollar back in a familiar direction on Wednesday - down. And by the time the lunch bell rang, the greenback had given back most of Tuesday's gains. As such, traders returned to the usual trades: buying stocks, commodities, etc.
The bottom line here is that after yesterday's rebound, the indices are once again a stone's throw from their recent highs and the DJIA needs a mere 97 points to climb to its highest level of this bull cycle. However, we would be remiss if we failed to point out that there is some resistance overhead and that, as we've been saying for a while now, the market remains in an overbought condition. But, in light of the fact that this is a one-way street these days, this is unlikely to matter (until it does, of course).
Turning to this morning... Stocks are movin' on up again this morning on China's GDP numbers, the PMI data in Europe, earnings after the bell, and Weekly Jobless Claims here in the U.S.
On the economic front... The Labor Department reported that initial claims for unemployment insurance for the week ending October 16 fell by 13,000 to 452K. The week’s total was 1K below the Reuters consensus for a reading of 453K. Last week’s total was revised higher to 475K from 452K. Continuing Claims for unemployment for the week ending October 9 were above consensus at 4.441M vs. expectations for 4.42M and last week’s revised (higher) 4.45M.
Finally, don’t let success go to your head or defeat into your heart...
Pre-Game Indicators
Here are the important indicators we review each morning before the opening bell...
Company
Symbol
EPS
Estimate
Company
Symbol
EPS
Estimate
* Report includes items that make comparisons to the consensus estimate questionable
Wall Street Research Summary
Upgrades:
Downgrades:
Long positions in stocks mentioned: none
For more "top stock" portfolios and research, visit TopStockPortfolios.com
The opinions and forecasts expressed are those of David Moenning, founder of TopStockPortfolios.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. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of TopStockPortfolios and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Stocks should always consult an investment professional before making any investment.
Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.
The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.
The information contained in our websites and TopStockPortfolios publications is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer.
Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.
Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.
Disclosure: none