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David Moenning is a the Chief Investment Officer at Heritage Capital, which focuses on active risk management of the U.S. stock market. Dave is also the proprietor of StateoftheMarkets.com, which provides free and subscription-based portfolio services. Dave began his investment career in 1980... More
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  • An Awful Lot To Consider

    Anyone expecting a quiet Columbus Day Holiday in the markets (where stock markets are open but banks and bond markets are closed) will likely to be disappointed as the news flow over the weekend and the early action in the futures market suggests that last week's volatility could continue.

    In the wee hours, U.S. stock futures were down 15 points and suggested that it might be a scary open on Wall Street. Traders were apparently concerned about all the Fed-speak coming out of an IMF/World Bank conference. Vice Chair Stanley Fischer said that rate hikes in the U.S. could be delayed by a global slowdown and Daniel Tarullo stated that he was worried about the state of global growth.

    In case it isn't obvious, the key driver to the markets right now is global growth, or, perhaps more appropriately, a lack thereof. The bottom line is that there is once again talk of recession in places like Japan, Germany and the Eurozone as well as a serious growth slowdown in China.

    On the latter subject, there were reports out of China that the government is targeting an annual growth rate of 7% in 2015. Recall that the economic growth for the world's second biggest economy has been downgraded almost constantly in 2014 and the current estimate for 2014 is in the 7.3% zone.

    Speaking of the slowdown in China, semiconductor maker Microchip (NASDAQ: MCHP) missed earnings badly and blamed conditions in China for the shortfall. As expected, the company's stock got slammed for a loss of -12.3%. However, the concerns about China's impact on earnings quickly spread to the rest of the semiconductor sector as the SOX index (NASDAQ: SOXX) fell -6.9%.

    Shifting the focus across the Atlantic, let's not forget that the banking crisis that threatened the unity of the Eurozone from mid-2009 through much of 2012 was never really fixed. And in case you missed it, Finland's debt rating was downgraded on Friday. And then later in the afternoon (recall that S&P just love to make announcements on sovereign debt ratings on Friday afternoon's) Standard & Poor's downgraded their outlook on France from neutral to negative. In short, this means that France's debt rating will see a downgrade in the coming months. If your first reaction to all of this is, "here we go again," join the club.

    While growth is the subject du jour, remember that the Fed is also still part of the game. For example, Goldman Sachs was out with a report over the weekend suggesting that the end to QE could produce a shock in the markets that will expose liquidity risk.

    However, the good news is that things have improved rather dramatically in the last couple of hours. The improved mood appears to be tied to the announcement that Russian President Putin announced orders to pull back 17,600 troops from the Ukrainian border. As a result, European bourses now sport a decent shade of green and U.S. futures now point to a flat open on Wall Street.

    Current Market Environment

    The key question of the day is how low can the market go during this corrective phase? For the last 3+ years, all declines were contained within the -3% to -6% range. So, with the S&P 500 now down -5.23% from its September high, the bulls argue that the difficult days ought to be ending any day now. However, we remain concerned that (a) the reasons for the current decline are fundamental, (b) the divergences seen in the market are typically present during major tops, and (c) this time we are starting to see some important indicators issue sell signals. So, while our market environment models remain neutral on balance at the present time, we continue to view risk levels as elevated.

    Looking At The Charts

    Last week's reversal of the prior reversals created a large degree of technical damage on the charts. First, the near-term support was broken. Next, the 150-day moving average, which had been support, snapped and now represents overhead resistance. And finally, the S&P put in a "lower low" on a closing basis. Granted, you have to squint to see it, but Friday's close was below the August low. The good news is that the S&P 500 remains above its upwardly sloping 200-day moving average and stocks are now oversold on both a short- and intermediate-term basis. Therefore, a countertrend, reflex bounce is likely in the near-term. But the key line in the sand remains the 200-dma, which currently resides at 19005. Should this level be violated, we can probably expect a strong "whoosh" lower thereafter.

    S&P 500 - Daily

    View Larger Image

    Pre-Game Indicators

    Here are the Pre-Market indicators we review each morning before the opening bell...

    Major Foreign Markets:
    Japan: closed
    Hong Kong: +0.24%
    Shanghai: -0.36%
    London: +0.19%
    Germany: +0.45%
    France: +0.28%
    Italy: +0.60%
    Spain: +0.70%

    Crude Oil Futures: -$1.21 to $84.61

    Gold: $6.20 at $1228.00

    Dollar: lower against the yen and pound, higher vs. euro.

    10-Year Bond Yield: Currently trading at 2.38%

    Stock Indices in U.S. (relative to fair value):
    S&P 500: +2.40
    Dow Jones Industrial Average: +17
    NASDAQ Composite: -2.15

    Thought For The Day:

    If you'll not settle for anything less than your best, you will be amazed at what you can accomplish in your lives. - Vince Lombardi

    Current Market Drivers

    We strive to identify the driving forces behind the market action on a daily basis. The thinking is that if we can both identify and understand why stocks are doing what they are doing on a short-term basis; we are not likely to be surprised/blind-sided by a big move. Listed below are what we believe to be the driving forces of the current market (Listed in order of importance).

    1. The Outlook for Global Growth
    2. The Price Action in the Major Stock Market Indices
    3. The State of Fed/ECB Policy
    4. The Outlook for U.S. Economy
    5. The Outlook for U.S. Earnings

    The State of the Trend

    We believe it is important to analyze the market using multiple time-frames. We define short-term as 3 days to 3 weeks, intermediate-term as 3 weeks to 3 months, and long-term as 3 months or more. Below are our current ratings of the three primary trends:

    Short-Term Trend: Negative
    (Chart below is S&P 500 daily over past 1 month)

    Intermediate-Term Trend: Moderately Negative
    (Chart below is S&P 500 daily over past 6 months)

    Long-Term Trend: Positive
    (Chart below is S&P 500 daily over past 2 years)

    Key Technical Areas:

    Traders as well as computerized algorithms are generally keenly aware of the important technical levels on the charts from a short-term basis. Below are the levels we deem important to watch today:

    • Key Near-Term Support Zone(s) for S&P 500: 1906
    • Key Near-Term Resistance Zone(s): 1930
    The State of the Tape

    Momentum indicators are designed to tell us about the technical health of a trend - I.E. if there is any "oomph" behind the move. Below are a handful of our favorite indicators relating to the market's "mo"...

    • Trend and Breadth Confirmation Indicator (Short-Term): Neutral
    • Price Thrust Indicator: Negative
    • Volume Thrust Indicator: Negative
    • Breadth Thrust Indicator: Negative
    • Bull/Bear Volume Relationship: Negative
    • Technical Health of 100 Industry Groups: Low Neutral
    The Early Warning Indicators

    Markets travel in cycles. Thus we must constantly be on the lookout for changes in the direction of the trend. Looking at market sentiment and the overbought/sold conditions can provide "early warning signs" that a trend change may be near.

    • S&P 500 Overbought/Oversold Conditions:
      - Short-Term: Oversold
      - Intermediate-Term: Oversold
    • Market Sentiment: Our primary sentiment model is Positive .
    The State of the Market Environment

    One of the keys to long-term success in the stock market is stay in tune with the market's "big picture" environment in terms of risk versus reward.

    • Weekly Market Environment Model Reading: Neutral

    Wishing you green screens and all the best for a great day,

    David D. Moenning
    Founder and Chief Investment Strategist
    Heritage Capital Research - A CONCERT Advisor
    Be Sure To Check Out the NEW Website!


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    Check out Heritage Capital Research's NextGen Active Risk Manager


    Indicator Explanations

     

    Trend and Breadth Confirmation Indicator (Short-Term) Explained: History shows the most reliable market moves tend to occur when the breadth indices are in gear with the major market averages. When the breadth measures diverge, investors should take note that a trend reversal may be at hand. This indicator incorporates an All-Cap Dollar Weighted Equity Series and A/D Line. From 1998, when the A/D line is above its 5-day smoothing and the All-Cap Equal Weighted Equity Series is above its 25-day smoothing, the equity index has gained at a rate of +32.5% per year. When one of the indicators is above its smoothing, the equity index has gained at a rate of +13.3% per year. And when both are below, the equity index has lost +23.6% per year.

    Price Thrust Indicator Explained: This indicator measures the 3-day rate of change of the Value Line Composite relative to the standard deviation of the 30-day average. When the Value Line's 3-day rate of change have moved above 0.5 standard deviation of the 30-day average ROC, a "thrust" occurs and since 2000, the Value Line Composite has gained ground at a rate of +20.6% per year. When the indicator is below 0.5 standard deviation of the 30-day, the Value Line has lost ground at a rate of -10.0% per year. And when neutral, the Value Line has gained at a rate of +5.9% per year.

    Volume Thrust Indicator Explained: This indicator uses NASDAQ volume data to indicate bullish and bearish conditions for the NASDAQ Composite Index. The indicator plots the ratio of the 10-day total of NASDAQ daily advancing volume (i.e., the total volume traded in stocks which rose in price each day) to the 10-day total of daily declining volume (volume traded in stocks which fell each day). This ratio indicates when advancing stocks are attracting the majority of the volume (readings above 1.0) and when declining stocks are seeing the heaviest trading (readings below 1.0). This indicator thus supports the case that a rising market supported by heavier volume in the advancing issues tends to be the most bullish condition, while a declining market with downside volume dominating confirms bearish conditions. When in a positive mode, the NASDAQ Composite has gained at a rate of +38.3% per year, When neutral, the NASDAQ has gained at a rate of +13.3% per year. And when negative, the NASDAQ has lost at a rate of -8.5% per year.

    Breadth Thrust Indicator Explained: This indicator uses the number of NASDAQ-listed stocks advancing and declining to indicate bullish or bearish breadth conditions for the NASDAQ Composite. The indicator plots the ratio of the 10-day total of the number of stocks rising on the NASDAQ each day to the 10-day total of the number of stocks declining each day. Using 10-day totals smooths the random daily fluctuations and gives indications on an intermediate-term basis. As expected, the NASDAQ Composite performs much better when the 10-day A/D ratio is high (strong breadth) and worse when the indicator is in its lower mode (weak breadth). The most bullish conditions for the NASDAQ when the 10-day A/D indicator is not only high, but has recently posted an extreme high reading and thus indicated a thrust of upside momentum. Bearish conditions are confirmed when the indicator is low and has recently signaled a downside breadth thrust. In positive mode, the NASDAQ has gained at a rate of +22.1% per year since 1981. In a neutral mode, the NASDAQ has gained at a rate of +14.5% per year. And when in a negative mode, the NASDAQ has lost at a rate of -6.4% per year.

    Bull/Bear Volume Relationship Explained: This indicator plots both "supply" and "demand" volume lines. When the Demand Volume line is above the Supply Volume line, the indicator is bullish. From 1981, the stock market has gained at an average annual rate of +11.7% per year when in a bullish mode. When the Demand Volume line is below the Supply Volume line, the indicator is bearish. When the indicator has been bearish, the market has lost ground at a rate of -6.1% per year.

    Technical Health of 100 Industry Groups Explained: Designed to provide a reading on the technical health of the overall market, this indicator takes the technical temperature of more than 100 industry sectors each week. Looking back to early 1980, when the model is rated as "positive," the S&P has averaged returns in excess of 23% per year. When the model carries a "neutral" reading, the S&P has returned over 11% per year. But when the model is rated "negative," stocks fall by more than -13% a year on average.

    Weekly State of the Market Model Reading Explained:Different market environments require different investing strategies. To help us identify the current environment, we look to our longer-term State of the Market Model. This model is designed to tell us when risk factors are high, low, or uncertain. In short, this longer-term oriented, weekly model tells us whether the odds favor the bulls, bears, or neither team.


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    Disclosures

    The opinions and forecasts expressed herein are those of Mr. David Moenning 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 is for informational purposes only. No part of the material presented in this report 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.

    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.

    David D. Moenning, an advisor representative of CONCERT Wealth Management Inc. (CONCERT), is founder of Heritage Capital Advisors LLC, a legal business entity doing business as Heritage Capital Research (Heritage). Advisory services are offered through CONCERT Wealth Management, Inc., an SEC registered investment advisor. For a complete description of investment risks, fees and services review the CONCERT firm brochure (ADV Part 2) which is available from your Investment Representative or by contacting Heritage or CONCERT.

    Mr. Moenning is also the owner of Heritage Capital Management (HCM) a state-registered investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Neither HCM, Heritage, or CONCERT is registered as a broker-dealer.

    Employees and affiliates of Heritage and HCM 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 Heritage/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.


    Looking For a Stock Portfolio that Also Manages Risk?

    Check out Heritage Capital Research's Hedged Equity Strategy


     

    Oct 13 9:01 AM | Link | Comment!
  • This Time, The Worries Are Fundamental

    Daily State of the Markets
    Friday, October 10, 2014

    Wow, what a week/month it has been so far. Students of market know that October has a reputation for increased volatility. And cutting to the chase, this October is certainly living up to that reputation as we've seen wild swings in the major indices each and every day this month.

    Shorter term, it is interesting to note that Monday and Tuesday saw declines as traders began to fret about global growth and the potential economic impact of an Ebola outbreak. The two-day drop wound up erasing all of the gains seen from last week's strong bounce. On Wednesday, stocks enjoyed a joyride to the upside in response to the Fed saying rates were not likely to rise any sooner than projected. That romp erased the entirety of the Mon/Tues decline. And then on Thursday, stocks got hit hard, which reversed all of the reversal, which, of course, had reversed the prior reversal!

    S&P 500 - Daily

    View Larger Image

    The problem on Thursday was simple. Traders and their fancy computers began to realize that if the Fed was worried about the potential impact of #GrowthSlowing, then maybe they should be worried too.

    Anyone following the economic data in the U.S. may be wondering what all the fuss is about. However, the U.S. isn't the problem. No, the concern is global. Despite the massive QE program and "Abenomics," Japan's economy is struggling mightily right now. In China, the economic growth rate is slowing enough (current projections are for a 7.3% annualized GDP) that there is talk of system-wide stimulus. In Europe, well, even Germany is weakening more than analysts expect and the R-word is being used with increased regularity. And lest you forget, this week the IMF downgraded their forecast for global growth.

    Here at home, the fear is that either the global economic slowdown or the potential Ebola problem will wind up hitting the U.S. economy - just as the Fed is about to start "exiting" their stimulative stance.

    Therefore, the question of the day is if the Fed's ZIRP (zero interest rate policy) will be enough to offset these concerns? Or put another way, can U.S. investors really expect the American economy to continue to motor along if the major economies of the globe are slumping?

    What's Different This Time

    As has been discussed ad nausea, this market has seen a #BTFD strategy implemented each and every time the S&P 500 has dipped a couple percentage points. This has been going on for years now. However, so far at least, the dip buyers have been overrun.

    One of the concerns is that the current bout of volatility is different than anything investors have seen lately. You see, this time there is no crisis to freak out about. No, this time, stocks are going down on fundamental fears.

    Another issue that could be placed in the 'It's different this time' category is the fact that market leadership has been narrowing dramatically and has now shifted to defensive areas. (Don't look now, but staples and utilities are leading the pack.)

    Consumer Staples Select Sector SPDR - Daily

    View Larger Image

    Then there are the technical divergences. As you may recall, something on the order of 50 percent of all stocks in the NASDAQ are down 20 percent or more from their highs. And then the well-publicized divergence between the blue chips and the small caps is getting worse.

    S&P 500 - Weekly

    View Larger Image

    Russell 2000 - Weekly

    View Larger Image

    The key here is that the combination of fundamental concerns, narrowing leadership, and technical divergences tend to be classic behavior for a market that is in the midst of a topping process.

    Sure, stocks could turn around today and reverse the reversal of the reversals once again. Remember, market tops can take an exceptionally long time to play out. After all, there is no recession in sight and seasonality definitely favors the bulls for the next six months. Plus, it is important to recognize that bear markets tend to be triggered by recessions, the Fed, or external events.

    One More Thing

    There is one more item to discuss on the topic of the increased volatility. Word has it that there is a new HFT algo in town. Apparently this algo is a bigger, badder version of anything that is out there currently and is basically causing liquidity in the S&P futures market to crater. Reports from Nanex indicate that the current liquidity is at the lowest levels seen since 2011.

    So, while only conspiracy theorists would blame this decline on the computers, it is worth knowing that there may be additional factors at work on an intraday basis.

    The Bottom Line

    The final point for today is this: Given the current action, it is probably a good idea to recognize that risk levels are elevated and that investors should play the game accordingly here.

    Turning To This Morning

    The U.S. market appears to be the dog wagging the global market tail this morning as yesterday's vicious decline on Wall Street has spread across around the world today. In Japan and Europe there are new worries about the state of the economies. Today there are reports that Germany is cutting its outlook on grwoth and word that European leaders are considering this to be their 'QE moment'. In addition, the weakness in China's economy is starting to impact earnings of tech companies. For example, Microchip (NASDAQ: MCHP) reported weaker than expected results and blamed the miss on China. Here at home, futures are down in sympathy and traders will be watching the recent lows and the 200-day moving average on the Dow and S&P 500.

    Pre-Game Indicators

    Here are the Pre-Market indicators we review each morning before the opening bell...

    Major Foreign Markets:
    Japan: -1.15%
    Hong Kong: -1.89%
    Shanghai: -0.60%
    London: -1.12%
    Germany: -2.02%
    France: -1.36%
    Italy: -1.12%
    Spain: -0.85%

    Crude Oil Futures: -$1.50 to $84.29

    Gold: -$1.60 at $1223.70

    Dollar: higher against the yen, euro and pound.

    10-Year Bond Yield: Currently trading at 2.307%

    Stock Indices in U.S. (relative to fair value):
    S&P 500: -5.91
    Dow Jones Industrial Average: -47
    NASDAQ Composite: -30.88

    Thought For The Day:

    Life is 10% what happens to you and 90% how you handle it. -Unknown

    Wishing you green screens and all the best for a great day,

    David D. Moenning
    President, Chief Investment Officer
    Heritage Capital Research
    Check Out the NEW Website!

    Positions in stocks mentioned: none

    Follow Me on Twitter: @StateDave (Twitter is the new Ticker Tape)

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    The opinions and forecasts expressed herein are those of Mr. David Moenning 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 is for informational purposes only. No part of the material presented in this report 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.

    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.

    David D. Moenning, an advisor representative of CONCERT Wealth Management Inc. (CONCERT), is founder of Heritage Capital Advisors LLC, a legal business entity doing business as Heritage Capital Research (Heritage). Advisory services are offered through CONCERT Wealth Management, Inc., an SEC registered investment advisor. For a complete description of investment risks, fees and services review the CONCERT firm brochure (ADV Part 2) which is available from your Investment Representative or by contacting Heritage or CONCERT.

    Mr. Moenning is also the owner of Heritage Capital Management (HCM) a state-registered investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Neither HCM, Heritage, or CONCERT is registered as a broker-dealer.

    Employees and affiliates of Heritage and HCM 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 Heritage/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.

    Oct 10 8:47 AM | Link | Comment!
  • Slow Means Go After Fed Alters Its Outlook

    Daily State of the Markets
    Thursday, October 9, 2014

    Until yesterday, traders worried that the Fed might increase rates sooner than expected. Until yesterday, traders were concerned that the recent good economic news might wind up being bad news for the stock market. And until yesterday, traders fretted that the Fed might make a mistake.

    However, all of the nervousness about what the Fed could, would, or should do next were put to rest after the release of the minutes from the latest FOMC meeting. In short, the minutes showed that Janet Yellen's merry band of central bank governors are now concerned that weakness overseas coupled with a rising U.S. dollar could hurt the economy here at home and keep inflation below the 2 percent target.

    The bottom line is the FOMC minutes were music to the ears of traders. And while the trading machines liked the statement initially, it was the human interpretation, which takes a few minutes to actually be developed, that caused stocks to rocket higher Wednesday afternoon.

    Don't Fight the Fed

    As far as the stock market is concerned, the key is the minutes showed that the FOMC members actually cut their outlook for both economic growth AND inflation. The instant interpretation was simple: rates are NOT going to be rising any time soon and the Ms. Yellen has "cover" to keep from raising rates for as long as she'd like.

    Bam! Within seconds, stocks were off to the races. High speed trend-following algos jumped on the long side. Shorts scrambled for cover. And the dip-buyers once again did their thing.

    The result was an impressive daily move that recovered all of Monday and Tuesday's losses. Suddenly the game wasn't about the weak German economic data, China's punk numbers, or the IMF's latest prognostication about global growth. Nope. Suddenly the game was back to being all about the Fed and the "liquidity trade."

    At issue here is the question of when the rate-hike campaign will begin. The general consensus is for the Fed to begin a very long series of small rate increases in June 2015. However, there has been a fair amount of angst lately due to the idea that the strong jobs numbers might cause the Fed to adjust this target.

    But, the minutes from the September FOMC meeting showed that the committee members are worried about the goings on in Europe as well as the recent spike in the greenback.

    "Some participants expressed concern that the persistent shortfall of economic growth and inflation in the euro area could lead to a further appreciation of the dollar and have adverse effects on the U.S. external sector," the minutes stated.

    It was interesting to note that the committee didn't limit their concerns to Europe and added China, Japan, and Ukraine/Russia to its list of worries. The exact verbiage was, "Several participants added that slower economic growth in China or Japan or unanticipated events in the Middle East or Ukraine might pose a similar risk."

    It's Not About the Calendar

    Also of interest to the markets was the effort by the FOMC to make clear the fact that future actions will be tied to the data and not the calendar. Apparently members want the "considerable time" language to be clarified so that their intentions cannot be misunderstood.

    Recall that Ms. Yellen caused quite a stir at her first press conference as Fed Chair when she suggested that "considerable time" meant something on the order of six months.

    "The concern was raised that the reference to 'considerable time' in the current forward guidance could be misunderstood as a commitment rather than as data dependent," the minutes stated.

    The minutes went on to add, "It was emphasized that the current forward guidance for the federal funds rate was data dependent and did not indicate that the first increase in the target range for the federal funds rate would occur mechanically after some fixed calendar interval."

    So there you have it. The Fed has taken the calendar off the table and made it clear that it's all about the data. And on that front, the committee also told the markets that things are not as peachy keen as the U.S. data might suggest and that they want to keep their options open.

    The Takeaway on the Charts

    It is interesting to note that things were not looking good in the early going on Wednesday. No, the S&P 500 initially dove lower and wound up breaking through its 150-day moving average. The venerable index also wound up testing last week's low, which was important to technical traders.

    But just when it looked like all was lost and the "meaningful correction" that so many analysts (as well as the divergence in the smallcaps) had been calling for was on, the Fed saved the day. Again.

    The reaction to the minutes in the market was strong and swift. The S&P 500 rallied a full 45 points (or 2.34 percent) from the morning low and finished with a gain of 1.75 percent on the day.

    S&P 500 - Daily

    View Larger Image

    From a chart perspective, yesterday's action was impressive. The 150-day was tested hard in the early going and the bulls wound up with an A+ on the day. The anticipated "retest" of the recent lows also occurred yesterday and once again, the test was successful. And finally, one can argue that the blast higher in response to the FOMC minutes produced a "key reversal" day.

    But (you knew that was coming, right?), the S&P remains in a downtrend from a short-term perspective and there is still a great deal of resistance overhead. As such, the bulls will be looking for a follow-through day in the next three days in order to confirm that yesterday's move was more than just algos running amok.

    So, the takeaway is that the market may have once again put in a "V" bottom and that #BTFD may be alive and well. But the bulls still have some work to do before anyone should get overly excited.

    Turning To This Morning

    Although stocks surged on Wall Street yesterday in response to the FOMC minutes and Alcoa kicked off earnings season with a nice beat, global markets are not exactly following suit this morning. In short, concerns about economic weakness hit Japan overnight and another weak report out of Germany (Exports fell 5.8% in August) is causing analysts to use the "R" word in Europe again. Markets across the pond started the day higher but have since reversed hard. As expected, U.S. futures have followed Europe's lead and now point to a weaker open on Wall Street.

    Pre-Game Indicators

    Here are the Pre-Market indicators we review each morning before the opening bell...

    Major Foreign Markets:
    Japan: -0.75%
    Hong Kong: +1.17%
    Shanghai: +0.26%
    London: -0.56%
    Germany: +0.02%
    France: -0.67%
    Italy: -0.98%
    Spain: -0.87%

    Crude Oil Futures: -$0.42 to $86.89

    Gold: +$22.20 at $1228.20

    Dollar: higher against the yen, lower vs. euro and pound.

    10-Year Bond Yield: Currently trading at 2.284%

    Stock Indices in U.S. (relative to fair value):
    S&P 500: -4.14
    Dow Jones Industrial Average: -58
    NASDAQ Composite: -6.44

    Thought For The Day:

    "My will shall shape my future. Whether I fail or succeed shall be no man's doing but my own" -Elaine Maxwell

    Wishing you green screens and all the best for a great day,

    David D. Moenning
    President, Chief Investment Officer
    Heritage Capital Research
    Check Out the NEW Website!

    Positions in stocks mentioned: none

    Follow Me on Twitter: @StateDave (Twitter is the new Ticker Tape)

    Advertisement
    Will You Be Ready For The NEXT Bear Market?

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    Contact Heritage for more information or call us at (847) 807-3590


    The opinions and forecasts expressed herein are those of Mr. David Moenning 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 is for informational purposes only. No part of the material presented in this report 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.

    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.

    David D. Moenning, an advisor representative of CONCERT Wealth Management Inc. (CONCERT), is founder of Heritage Capital Advisors LLC, a legal business entity doing business as Heritage Capital Research (Heritage). Advisory services are offered through CONCERT Wealth Management, Inc., an SEC registered investment advisor. For a complete description of investment risks, fees and services review the CONCERT firm brochure (ADV Part 2) which is available from your Investment Representative or by contacting Heritage or CONCERT.

    Mr. Moenning is also the owner of Heritage Capital Management (HCM) a state-registered investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Neither HCM, Heritage, or CONCERT is registered as a broker-dealer.

    Employees and affiliates of Heritage and HCM 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 Heritage/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.

    Oct 09 8:58 AM | Link | Comment!
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