David Moenning's  Instablog

David Moenning
Send Message
David Moenning is a the proprietor of StateoftheMarkets.com. In addition to providing free and subscription-based portfolios on "State", Dave is a full-time money manager and the President and Chief Investment Strategist of a Chicago-based Registered Investment Advisory firm. Dave... More
My company:
StateoftheMarkets.com
My blog:
Daily State of the Markets
  • No Catalyst Needed 0 comments
    Oct 11, 2012 8:19 AM

    Daily State of the Markets
    Thursday, October 11, 2012

    Good morning. The question I've been asked most frequently this week is, "Why are stocks going down?" The question has usually been accompanied by some commentary stating that there really hasn't been any major negative data, news stories, headlines or even any significant new rumors out of Europe. It has also been pointed out that the Chinese markets have actually rallied a bit since coming back from a week long holiday and that Mitt Romney has been gaining in the polls. And yet stocks seem to be losing 100 points or more each day, with no end in sight. As such, the general sentiment behind the questions I've been asked is, what gives?

    The easy response would be to offer up some pabulum about "profit taking" or "uncertainty" as the popular press tends to do. However, it has long been my stance that markets don't make big moves without a reason. And while the -2.27% pullback from the 9/14 high seen on the S&P 500 isn't exactly a debacle, the intraday moves lately have clearly been one-sided. Thus, I figure I've got some 'esplainin' to do to those asking me why we are seeing the sea of red lately.

    Cutting to the chase, I believe that stocks are being sold (albeit by computer algorithms, which are clear as day if you are watching closely) on the idea that while there is a distinct lack of high profile catalysts at the present time, there are any number of large catalysts looming as well as some "little stuff" that hasn't been terribly encouraging. And the bottom line is that the guys and gals programming the machines believe that the future catalysts are going to be placed in the minus column.

    The current expectations for what is going to happen next reminds me of the pervasively negative tone that traders had coming into 2012. If you will recall, anybody and everybody could rattle off the reasons that stocks were doomed as the macro backdrop appeared to be awful - with no hope in sight.

    I'm going to opine that a similar mood has taken over at the corner of Broad and Wall (oops, I mean Mahwah, New Jersey) as traders now fear that earnings are going to stink up the joint, that China will fumble the stimulus ball, that Greece may leave the EU (I really can't believe we're STILL talking about this), that Spain isn't ever going to ask for help, that the children in Congress will never learn to get along and in the process push the U.S. over the fiscal cliff, that Middle East tensions will explode, and that maybe, just maybe Mitt Romney might win the election.

    I know, that last one is a bit of a head scratcher. Most people are probably under the assumption that a Republican victory in November would be celebrated by the stock market. But since the Presidential debate, stocks have now moved lower - this despite the fact that Romney has moved up in the polls. The simple explanation is Mitt Romney has made it clear that he is not a fan of the Bernanke cavalry. In fact, Romney has stated that he would "fire Ben Bernanke." And while a President can't actually fire a Fed Chairman, our next Commander in Chief will be responsible for appointing the next head of the Federal Reserve. So, with Romney gaining in the polls, some traders fear that the punch bowl is going to get pulled from their QE party.

    But I digress. The question of the day is why stocks are in decline when there hasn't been any big news to drive the action. My point this morning is that there is no big catalyst needed at the present time due to the facts that (1) there are a boatload of catalysts looming in the not-too distant future, (2) tech (especially the semi's) has been a disaster lately and everybody knows that tech leads the market, and (3) the earnings from the likes of Cummins (NYSE:CMI), Alcoa (NYSE:AA), and Chevron (CHV) as well preannouncement from Avnet (NYSE:AVT) have left a bad taste in the mouths of traders.

    So with the bears clearly in possession of the ball right now, we will probably need to see the bulls come up with some sort of catalyst in order to put a stop to what appears to be the New England Patriots on the other side of the ball. Otherwise the bears may continue to roll for a while.

    Turning to this morning... Despite a downgrade to Spain's sovereign debt rating, European markets and U.S. futures are modestly higher in the early going. Some suggest that the S&P downgrade to Spain will push Madrid to formally request aid from the EU, which would be viewed as a positive in terms of putting an end to the crisis in Europe.

    On the Economic front... We'll get reports on Weekly Jobless Claims, Import/Export Prices, and the Bloomberg Consumer Comfort Index this morning. In addition the Treasury will auction off 30-year bonds today with results expected at 1:00 pm.

    Thought for the day... Instead of just muddling through, why not make a concerted effort to enjoy your day to the fullest?

    Pre-Game Indicators

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

    • Major Foreign Markets:
      • Shanghai: -0.80%
      • Hong Kong: +0.38%
      • Japan: -0.57%
      • France: +0.66%
      • Germany: +0.73%
      • Italy: +0.39%
      • Spain: -0.29%
      • London: +0.65%
    • Crude Oil Futures: +$0.90 to $92.15
    • Gold: +$5.60 to $1770.70
    • Dollar: lower against the yen, euro, and pound
    • 10-Year Bond Yield: Currently trading at 1.696%
    • Stock Futures Ahead of Open in U.S. (relative to fair value):
      • S&P 500: +3.74
      • Dow Jones Industrial Average: +25
      • NASDAQ Composite: +10.71

    Positions in stocks mentioned: AAPL

    Follow Me on Twitter: @StateDave

    Download our Special Report on our New "Adaptive" Active Risk Management System for the Stock Market


    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 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 StateoftheMarkets.com 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. One 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 this report 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. (NASDAQ: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: I am long AAPL.

Back To David Moenning's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.