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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
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Daily State of the Markets
  • Even The Bears Are Bulls... For Now 0 comments
    Dec 4, 2013 8:01 AM

    Daily State of the Markets
    Wednesday, December 4, 2013

    Editor's Note: Dave M. has asked friend and colleague Paul Schatz to fill in for him this morning and provide commentary on the current "state of the market." Paul is a professional money manager for Heritage Capital, LLC and has been live, on the firing line with clients for 26 years.

    The stock market is tired, again. That seems like a phrase I have used often this year without much follow through. There have been many times in 2013 when the market had risen sharply and then looked just plain weary. Instead of correcting or even pulling back smartly, the stock market behaved like it does when it's in a powerful bull trend; it's consolidated sideways within a few percent of its high and then blasted off again.

    "Is this time different?" That's one of the scariest phrases in our business!

    The only difference I see now with other 2013 overbought markets is that sentiment is now and has been at rally killing levels, something I mentioned on CNBC and Fox Business over the past few weeks as well as here and in Street$marts. If this was not early December, I would have much stronger conviction to be negative, but it's almost unheard of to see a meaningful peak or significant decline at this time of the year. That's tough to ignore. While I absolutely hate when people say they are "cautiously optimistic", I will say that I am a nervous bull who is dancing very close to the door.

    So here we are, during the most positive time of the year. Something like 8 of the last 10 Decembers have been up. Stocks are at all time highs. There is no impetus to sell. There are few downside catalysts. Even the bears are bullish until January. Yet all is not right. Today (December 2) and tomorrow are historically very good days in the market. Stocks opened well and moved higher into lunch, but then the bears tried to make another stand. This time, they were successful, closing the market just off the lows of the day and ending with a semi nasty looking candlestick on the daily chart.

    If we do not see an immediate about face on Tuesday, the evidence will point to a sometimes typical early December pullback of 2-5% that should bottom within five days of option expiration on the 20th. Don't forget there is a two day Fed meeting on the 17th & 18th where taper talk will be all the rage. What a great excuse for a low if the market sold off into that meeting!

    While small caps and technology have led the rally for the past few weeks, it looks like they are trying to cede leadership to large and mid caps. IF there is a pullback and IF the small caps and tech underperform for a week or two or so, that would set up such a nice trade into January for buying the Russell 2000, S&P 600 and NASDAQ 100 for the final 5-10 days of the year. There is also a tendency for the semiconductor group, which leads tech, to perform poorly over the next two weeks. It would all fit together nicely.

    But that is putting cart so far in front of the horse. Let's wait and see what happens over the coming few days. There is no need to push and rush here as stocks are extended and tired regardless.

    On a separate note, gold was bludgeoned today and is now set up to see sub $1200 sooner than later. Sentiment has been worse than awful, but even that hasn't been able to thwart the bears. At some point it is going to matter, but that will likely be from lower levels on the metals and perhaps all time bearish levels of sentiment.

    I hope you had a meaningful and fantastic Thanksgiving!

    Happy Hanukah to those who celebrate!!

    Paul Schatz

    Paul Schatz is President and Chief Investment Officer of Heritage Capital, LLC, in Woodbridge, CT. Paul developed and manages all eight of the firm's currently offered investment programs.

    Be sure to check out Paul's Blog: Invest For Tomorrow

    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...

    Macro data (Services PMI) around the globe and concerns about what the Fed may or may not do next appears to be the focal point of the market at this time. The Services PMI data was mixed across the pond with the readings in the Eurozone, Germany, Spain, and Sweden coming above expectations while those in France, Italy, and Ireland disappointed. This has led to modestly lower prices in Europe and U.S. futures are following suit ahead of the ADP jobs report.

    Pre-Game Indicators

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

    Major Foreign Markets:
    - Japan: -2.17%
    - Hong Kong: -0.76%
    - Shanghai: +1.32%
    - London: -0.19%
    - Germany: -0.07%
    - France: -0.20%
    - Italy: -0.17%
    - Spain: -0.10%

    Crude Oil Futures: +$1.07 to $97.11

    Gold: -$6.60 to $1214.20

    Dollar: higher against the yen, euro and pound.

    10-Year Bond Yield: Currently trading at 2.811%

    Stock Futures Ahead of Open in U.S. (relative to fair value):
    - S&P 500: -3.15
    - Dow Jones Industrial Average: -5
    - NASDAQ Composite: -1.02

    Thought For The Day...

    Laughter is the brush that sweeps away the cobwebs of your heart. - Mort Walker

    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. (NASDAQ: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.

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