Seeking Alpha

David Moenning's  Instablog

David Moenning
Send Message
David Moenning is a the Chief Investment Officer at Heritage Capital Management. Dave is also the proprietor of StateoftheMarkets.com, which provides free and subscription-based portfolio services. Dave began his investment career in 1980 and has been an independent money manager since 1987.... More
My company:
StateoftheMarkets.com
My blog:
Daily State of the Markets
  • Traders: We Won't Get Fooled Again 0 comments
    Sep 26, 2013 8:07 AM

    Daily State of the Markets
    Thursday, September 26, 2013

    With a fifth consecutive down day now in the books, which just happens to be the first such occurrence of the year, those coming to work dressed in their bear costumes were seen rejoicing Wednesday evening. Despite the fact that the S&P 500 is off less than 2 percent (-1.898% to be exact) from its recent all-time high, those that see the glass as half empty once again believe that their time has come. After all, if the market can't produce a single up day after the "no taper" blast, things can't be in very good shape, right?

    On the other side of the field, the bear opponents see things a little differently. Instead of the world coming to an end on account of the looming government shutdown or even an imminent tapering of QE, those donning the rose-colored Revo's these days suggest another view. In short, the bulls contend that the current malaise seen in the market is more likely attributed to traders taking a wait and see approach to the mess in Washington than a rush to the exits.

    One analyst, who obviously has good taste in music, suggested that the Who's classic Won't Get Fooled Again is the most appropriate analogy for this market.

    A Blast From the Past

    Please forgive the brief trip down memory lane. But anyone growing up in the 1970's is obviously intimately familiar with this classic rock 'n roll anthem. (Most of the younger baby boomers probably still proudly own the original vinyl copy of the album.) And now that the song's refrain will likely be stuck in your head for the rest of the day, it's time to get back to the matter at hand - how the title of one of the all-time great songs fits in with the stock market.

    In short, traders are not looking to get fooled again by Washington's antics. Ever since the fall of 2011, when the games the politicians played cost the U.S.A. its triple-A credit rating, traders have sold stocks in response to the fear of what might come next. Whenever the issue of the nation's debt ceiling or the government's budget is broached, the algos go into high gear, reacting violently to every word that comes out of the politician's mouths. And based on the sheer volume of commentary that emanates out of Washington each day, this has led to a great deal of volatility along the way.

    Thus, the fast money has learned to sell each and every time the politicians take to the microphone and then buy 'em back (at the speed of light, of course) when the issue ultimately gets resolved. While history shows that there have been some fairly significant pullbacks surrounding these big governmental debates, the key is the market ultimately moved higher once the issue at hand moved to the back burner.

    Learning A Lesson?

    This time around though, it appears that traders may not be biting. In short, they don't want to get fooled again. Armed with the knowledge of the way this game has turned out over the past two-plus years, this time there doesn't appear to be any big selling pressure. There is no panic. There is no real fear. The bottom line is that everybody now understands that our elected officials will likely find a way to avert disaster (political disaster, that is) and keep the country running.

    So, perhaps traders have learned a lesson. Perhaps everyone is waiting to buy the anticipated dip. Perhaps no one wants to expose new money to the violence that could occur if Washington screws the pooch this time. And perhaps the bears aren't interested in pressing their bets here. But from this man's perspective, the key is that nobody wants to get fooled again. Cue the air guitar.

    Looking for a disciplined approach to managing stock market risk on a daily basis? Check Out My "Daily Decision" System. Forget the fast money and the latest, greatest option trade. What investors need is a strategy to keep them "in" the stock market during bull markets and on the sidelines (or short) during bear markets.

    Turning to This Morning...

    Not much new to report in the early going. While Japan was higher overnight on hopes for a new tax cut, the rest of the overseas markets are in the red at this time. Here at home, traders will be hoping to avoid a sixth straight losing session and are sure to be watching the first revision to U.S. GDP, Weekly Jobless Claims, and Pending Home Sales. At this point, U.S. futures are pointing to a modestly higher open. However, the pre-market futures action has meant little of late.

    Pre-Game Indicators

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

    Major Foreign Markets:
    - Japan: +1.22%
    - Hong Kong: -0.36%
    - Shanghai: -1.97%
    - London: -0.02%
    - Germany: -0.11%
    - France: -0.27%
    - Italy: -1.41%
    - Spain: -0.06%

    Crude Oil Futures: +$0.48 to $103.14

    Gold: +$0.50 to $1336.70

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

    10-Year Bond Yield: Currently trading at 2.630%

    Stock Futures Ahead of Open in U.S. (relative to fair value):
    - S&P 500: +3.48
    - Dow Jones Industrial Average: +38
    - NASDAQ Composite: +13.0

    Thought For The Day...

    The worst thing about being lied to is simply knowing you weren't worth the truth. -Unknown

    Positions in stocks mentioned: none

    Follow Me on Twitter: @StateDave


    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. (HCM) a Chicago-based money management firm. HCM is registered 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 (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Most Commented
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.