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:
My blog:
Daily State of the Markets
  • Problem(s) Solved 1 comment
    Feb 2, 2011 8:54 AM

    Daily State of the Markets 
    Wednesday Morning - February 2, 2011

    Good morning. In a way, it's laughable the way the market has acted over the last three days. One minute the sellers are crying wolf and hitting the market with every sell program they can find because of the powder keg in the Middle East (and for the record, when isn't the Middle East a powder keg waiting to explode at any moment?) and the next, oh, that's right, the market is closing at new highs for the bull market cycle.

    On one hand, we are pleased that we went on record as saying that Friday's action was at least partially artificial and related to fear of what could have happened over the weekend. But on the other hand, as participants in the game, I'm here to say that it is no fun being whipped around like this. And given the head-shaking action we've seen since 10:00 am Friday morning, it is little wonder that the most popular question in my email inbox was something on the order of "What the heck?"

    Putting emotion aside, it is fairly easy to see what is going on. At least a portion of Friday's rout was driven by the worry over what appeared to be a developing problem in Egypt. Don't forget that the most popular question being bandied about on Friday wasn't "Who is gonna win the Super Bowl?" but rather, "Is Egypt the next big problem?"

    Experience teaches us that the market's reaction to geopolitical problems is usually the same. First there is an issue that is basically ignored by the markets. Then something occurs that grabs people's attention and fear starts to mount. Then there is some sort of a trigger that creates a selling panic. Next is the continuation of that fear/selling as everyone begins to extrapolate what will happen in the future. And then finally, there is the solution, which, is generally accompanied by a furious rally.

    If any of this is starting to sound familiar, give yourself a gold star. In short, what we have seen since Friday afternoon is a condensed version of what is generally referred to as a "bad news panic" scenario. First the riots were ignored for three days. Then things got ugly and traders started hitting the sell button early and often. But instead of the problem being strung out for a while (during which time, the bears usually gain some significant ground), this time, the problem got solved in a big hurry as President Mubarak appears to be bowing to the pressure of the people.

    So, with the Egypt problem getting solved - well, at least as far as Wall Street is concerned - traders decided it was time to cover their shorts. And then as the technical levels were breached (this time to the upside), the stops were hit and people piled on the buy orders. Now toss in the fact that it was the first day of the month and you've got a recipe for a triple-digit advance.

    Speaking of problems and their solutions, lost in the stock market shuffle Tuesday was word out of Europe that the ECB/EU was preparing to buy up a bunch of Greek debt and extend the terms of other Greek issues out to 30 years. In addition, Germany was proposing a change in the EU constitution to put a limit on debt/GDP ratios and to coordinate corporate tax rates, among other things. Thus, I argued to a colleague yesterday that we can probably make a checkmark in the "problem solved" box next to the heading of European Debt Crisis.

    And lest we forget, the bears like to yammer on about how the economic recovery in the U.S. is doomed, or at the very least, won't last long. However, yesterday's ISM readings both here and abroad would beg to differ as the reports on the state of manufacturing was once again better than expected. Thus, we should probably recognize that the economic problem that plagued the market last summer has also been solved for a while now.

    So, where to from here, you ask? Well, in light of the fact that there were some gaps created by yesterday's excitable open, we wouldn't be surprised to see some backing and filling. But, we must also recognize that the melt-up could very well pick up where it left off from last Thursday - especially now that all of those problems are solved!

    Turning to this morning... Although Asian markets followed Wall Street higher, European bourses are mixed at the moment and stock futures in the U.S. are slightly below fair value after S&P downgraded Ireland. However, the ADP report seems to have lifted the spirits a bit.

    On the Economic front... Challenger, Gray and Christmas reports that there were 38,519 planned job cuts announced in January which was up 20% from December’s 32,004 but down 46% from year ago levels. The planned job cut total for the month of January was the lowest seen in the month since Challenger started keeping records in 1993.

    Next up, ADP reported that the private sector job market expanded again during the month of January. The report shows that private sector jobs rose by 187K jobs during the month, which was above the consensus expectations for a gain of about 147K. December’s report was revised lower to a gain of 247,000 jobs from the initial report of 297K.

    Thought for the day: Never forget the first rule of life, medicine, and money management: Do no harm...

    Pre-Game Indicators

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


    • Major Foreign Markets:
      • Australia: +0.95%
      • Shanghai: +0.31%
      • Hong Kong: +1.81%
      • Japan: +1.78%
      • France: -0.23%
      • Germany: -0.02%
      • London: +0.62%


    • Crude Oil Futures: -$0.12 to $90.65
    • Gold: -$1.60 to $1338.70
    • Dollar: lower against the Yen and Pound, higer vs Euro
    • 10-Year Bond Yield: Currently trading at 3.443%


    • Stocks Futures Ahead of Open in U.S. (relative to fair value):
      • S&P 500: -1.99
      • Dow Jones Industrial Average: -17
      • NASDAQ Composite: -3.30


    Wall Street Research Summary


    • RBC Bearings (NASDAQ:ROLL) - BofA/Merrill
    • Hexcel (NYSE:HXL) - BofA/Merrill
    • Anadarko Petroleum (NYSE:APC) - Canaccord Genuity
    • Walgreens (WAG) - Citi
    • Quest Software (NASDAQ:QSFT) - Goldman Sachs
    • Eagle Materials (NYSE:EXP) - Jefferies
    • Helix Energy (NYSE:HLX) - Morgan Stanley
    • UPS (NYSE:UPS) - Target increased at RBC
    • Thomson Reuters (NYSE:TRI) - Target increased at RBC
    • Manitowoc (NYSE:MTW) - RBC



    • Kennametal (NYSE:KMT) - BofA/Merrill
    • Activision Blizzard (NASDAQ:ATVI) - BofA/Merrill
    • Big 5 Sports (NASDAQ:BGFV) - Deutsche Bank
    • Dollar General (NYSE:DG) - Deutsche Bank
    • Wal-Mart (NYSE:WMT) - Deutsche Bank
    • Bemis (NYSE:BMS) - Deutsche Bank
    • Nuance Communications (NASDAQ:NUAN) - Goldman Sachs
    • Orexigen (NASDAQ:OREX) - Jefferies
    • Harte-Hanks (NYSE:HHS) - JPMorgan
    • Energizer (NYSE:ENR) - Morgan Stanley
    • Landstar (NASDAQ:LSTR) - Piper Jaffray
    • Dollar Tree (NASDAQ:DLTR) - Piper Jaffray


    Yesterday's Earnings After the Bell



    Aflac AFL $1.33 $1.35
    Broadcom BRCM $0.58* $0.73
    Boston Scientific BSX $0.20* $0.10
    C.H. Robinson CHRW $0.62 $0.63
    Electronic Arts ERTS $0.59 $0.56
    Leggett & Platt LEG $0.21 $0.23
    MEMC Electronic Materials WFR $0.25* $0.34

    Earnings Before The Bell



    Cameron International CAM $0.69 $0.67
    Genworth Financial GNW -$0.33* $0.16
    Hospira HSP $0.77 $0.93
    Hershey HSY $0.59 $0.61
    Mattel MAT $0.89 $0.86
    Nasdaq OMX Group NDAQ $0.55 $0.51
    Thermo Fisher Scientific TMO $1.00 $0.95
    Time Warner TWX $0.67 $0.62
    Wisconsin Energy WEC $1.06 $1.01
    Whirlpool WHR $2.11 $2.26

    * Report includes items that make comparisons to the consensus estimate questionable

    Long positions in stocks mentioned: none

    For more "top stock" portfolios and research, visit TopStockPortfolios.com


    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 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 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.

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 (1)
Track new comments
  • alan.greenscam
    , contributor
    Comments (353) | Send Message
    Thx David... you take the words right out of my mouth with every article you write....
    2 Feb 2011, 09:50 AM Reply Like
Full index of posts »
Latest Followers


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.