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David Moenning
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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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Daily State of the Markets
  • Did Anything Change? 2 comments
    Jun 10, 2011 8:47 AM

    Daily State of the Markets 
    Friday Morning - June 10, 2011

    Good Morning. The popular press was all over the fact that yesterday's bounce higher in the stock market put an end to the first six-day losing since the dark days of the Credit Crisis bear market. And while I may be interpreting the message wrong, it felt like several sources were implying that the rally also meant an end to the corrective phase was at hand. However, the key question after a day like Thursday is this: Did anything happen to change the environment?

    Any market analyst worth their keyboard knew that stocks were oversold and that the market sentiment had become dour. And most everybody who watches the game closely knew that this type of condition generally (but not always) produces a rebound at some point. So, now that we got the requisite oversold bounce, the questions that need to be asked include: Was there any news that impacts or changes the current environment? Are the reasons for the decline still intact? Were there signs of short-covering or any "real" buying? And finally, how was the action around important technical levels on the charts?

    So let's see... On the news front, there were no obvious catalysts to make traders sit up and say, "Hey, we've got it wrong - Buy 'em!" The jobless claims were below expectations and still comfortably over the 400K level. Thus, that's a minus. The Trade Deficit did come in better than expected and was touted as a positive. However, my first reaction was, "Really? When was the last time anybody cared about that number?" In addition, if you actually read the report, it became clear that the reason for the improvement in the trade deficit was the supply chain interruptions in Japan - which isn't likely to last very long. Next, was Wholesale Inventories, which was also below the estimates. So, this too was a minus.

    However, there were some items that seemed to perk up the spirits of traders yesterday. First there were the comments from the ECB. And while you had to read between the lines and draw your own conclusions, the message from the ECB was viewed as being constructive. The central bank said it would provide unlimited liquidity to the banks in the region and although there was talk of a rate hike in July, the ECB did not increase its inflation target for the rest of 2011. Thus, one could argue that Trichet & Co. might be backing off their hawkish stance - at least temporarily.

    There was also a fair amount of chatter about the outlook for Greece yesterday. And since the current decline is being sponsored by a "soft patch" in the U.S. and the uncertainty over Greece, this remains a hot topic. While there was no clarification on the subject, one does get the impression that the powers-that-be in Europe aren't going to let this situation get out of hand. Thus, any resolution here would be worth a nice pop to the upside for stocks around the globe.

    Getting back to the question at hand, it is safe to say that the Dow did manage to break an ugly losing streak. However, we're going to suggest that nothing really occurred to alter the reasoning behind the decline. And the "action" around the S&P's 150-day moving average wasn't terribly inspiring either (although that could quickly change). As such, it is my humble opinion that we're back to the title of yesterday's missive: How Much is Enough?

    The one thing that did appear to change yesterday is that the calls for QE3 grew louder and more frequent. Whereas the idea of Bernanke's gang buying more bonds was all but dead a few weeks back, it now appears that there is a growing chorus for the FOMC to once again ride in on their white horses and push stock prices higher. Personally, I don't think the data warrants such a move. However, should the economic reports start to take a turn for the worse; well, we just might see Mr. Bernanke choose to take out another insurance policy on the economic recovery.

    So, despite the fact that stocks remain oversold and the bulls might deserve some further upside, it is probably best to remain cautious at the present time. Remember, this bull market is now in its third year and as of April 29th; the S&P had doubled in value (+101.5%) from the March 9, 209 low. I'm just saying...

    Turning to this morning... Concerns about Greece continue to be the focus as there did not appear to be any momentum created by yesterday's bounce on Wall Street. Given that it is a summear Friday, things could definitely pick up as the day progresses. But so far at least, it looks like a soft open.

    On the Economic front... The government reported that Import Prices for the month of May rose by +0.2%, which was above the consensus for an decline of -0.7%.Export prices also rose by +0.2%, which was below last month’s revised level of +0.9%.

    Thought for the day... Best of luck on this Friday and be sure to enjoy the weekend!

    For more of Mr. Moenning's commentary, market analysis, and portfolio ideas, visis TopStockPortfolios.com

    Pre-Game Indicators

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

     

    • Major Foreign Markets:
      • Australia: +0.29%
         
      • Shanghai: +0.10%
         
      • Hong Kong: -0.81%
         
      • Japan: +0.50%
         
      • France: -0.43%
         
      • Germany: -0.11%
         
      • London: -0.19%

       
    • Crude Oil Futures: -$1.24 to $100.69
       
    • Gold: -$0.50 to $1542.20
       
    • Dollar: higher against the Yen, Euro and pound
       
    • 10-Year Bond Yield: Currently trading at 2.960%
       
    • Stocks Futures Ahead of Open in U.S. (relative to fair value):
      • S&P 500: -3.70
         
      • Dow Jones Industrial Average: -26
         
      • NASDAQ Composite: -8.55

     

    Wall Street Research Summary

    Upgrades:

    • Arkansas Best (ABFS) - Added to Short-Term Buy at Deutsche Bank
       
    • Zipcar (ZIP) - JPMorgan
       
    • Investment Technology (NYSE:ITG) - Keefe, Bruyette & Woods
       
    • Noble Corp (NYSE:NE) - Morgan Keegan
       
    • QEP Resources (NYSE:QEP) - Susquehanna
       
    • CME Group (NASDAQ:CME) - UBS
       
    • Micron (NASDAQ:MU) - Wells Fargo

       

      Downgrades:

    • Zale (NYSE:ZLC) - BofA/Merrill
       
    • Teekay Tankers (NYSE:TNK) - Removed from Short-Term Buy at Deutsche Bank
       
    • Rockwell Automation (NYSE:ROK) - HSBC
       
    • SunTrust Banks (NYSE:STI) - Macquarie
       
    • Cracker Barrel (NASDAQ:CBRL) - Morgan Keegan
       
    • CarMax (NYSE:KMX) - Target reduced at Oppenheimer
       
    • Terex (NYSE:TEX) - Target and estimates cut at UBS

       

      Long positions in stocks mentioned: None

       


      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. (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.

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Comments (2)
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  • Michael Parmar
    , contributor
    Comments (224) | Send Message
     
    David,

     

    Your articles always make me think about the market twists and turns and put them into context.

     

    Yesterday (and today's) question "How much is enough?" got me thinking all day about it, and inspired me to significant time trying to get a handle on it from a quantitative perspective. My efforts were published on this site "How much lower growth is priced into the Dow?"
    seekingalpha.com/artic...

     

    That is thanks to your thought provoking article yesterday!
    10 Jun 2011, 10:47 AM Reply Like
  • David Moenning
    , contributor
    Comments (482) | Send Message
     
    Author’s reply » Happy to help... I'll check out your results!
    11 Jun 2011, 10:39 AM Reply Like
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