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Dr. Kris has two degrees from MIT because one just wasn't enough. Her life goal was to figure out the universe and having done that (at least to her satisfaction), she decided to tackle something even more difficult—the stock market. Applying the scientific method along with an insatiably... More
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  • Intraday Market Notes: Aero & Defense Stocks Getting Lift-Off -- November 6 0 comments
    Nov 6, 2012 4:39 PM | about stocks: LLL, HII, LMT, TDG, HON, PPA

    3:50 pm ET: Well, it sure seems as if the market has already determined that it will be an Obama victory if that's the way we should interpret today's heavy risk-on trade. The reasoning behind this is thus: Obama will keep Bernanke in office and Bernanke is committed to keeping interest rates near zero for as long as unemployment and housing lag. This means more money printing (aka quantitative easing) which drives up the value of commodities (especially precious metals). This is good for stocks, too, as investors search for places to put their cash (they won't buy investment grade bonds since the yields are too low).

    On the other hand, a Romney victory could also be good for some stocks due to an expected cut in the corporate tax rate. Companies involved in the defense industry may flourish as well as Romney is committed to maintaining a strong national defense. However, Romney has hinted that he's not a fan of continued money printing and should he appoint a Fed chair who isn't so willing to paper over our problems, then we could see a rise in interest rates. This would make bonds more attractive to the detriment of stocks, and less money in circulation would put the kibosh on the precious metals. It's impossible to say with any certainty that today's market action is indeed signaling an Obama victory, but you have to admit that it does appear to be that way.

    However, there is a big ray of hope for the Romney camp as aerospace and defense stocks are up nicely. Breaking out to new highs today are L-3 (NYSE:LLL), Huntington Ingalls (NYSE:HII), Lockheed Martin (NYSE:LMT), Transdigm (NYSE:TDG), and Honeywell (NYSE:HON). Reflecting these moves is the aero & defense etf (NYSEARCA:PPA) which also broke out to a new high. A Romney win would likely give these issues a further boost.

    A note on today's market action: Although the major averages enjoyed a nice rally today, the SPX is still in our Sell Zone. It'll have to hurdle 1440 to move it back into the Buy side. Also we have the DTX bumping up against 520, an area of recent resistance, and an elevated VIX. What this means is that a rally continuation is not at all set in stone. We'll have more clarity once the results of the election are final--hopefully sooner rather than later.

    Note to Subscribers: There are no new entries, but I am going to be researching a new Stock of the Day candidate.

    Stocks: LLL, HII, LMT, TDG, HON, PPA
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