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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
  • It's Time To Take Sides 0 comments
    May 24, 2010 8:56 AM

    Daily State of the Markets 
    Monday Morning – May 24, 2010

    It's time to take sides, to pick your team, and to commit to a game plan. In short, investors must make a decision and make it fast: Are you a chartist looking for additional upside this week or a fundamentalist trying to further de-risk your portfolio?

    To market technicians, Friday was a clear-cut buy signal. Yes, we know it was an options expiration event and as such, the volume was artificially high. And yes, we know that short-covering most likely was responsible for both the bounce off of the bottom and the late-day surge of 150 points in the last 15 minutes. But the bottom line is technicians don't care about any of that because in their world, "the tape tells all."

    From a purely technical perspective, two very important events occurred on Friday. First, all of the major indices (which we define as the Dow, S&P 500, NASDAQ, Russell 2000, and S&P Midcaps) successfully tested their respective Flash Crash lows of May 6th. This, in and of itself, is a big reason to get excited from a chart perspective. But wait, there's more. Again, from a purely technical point of view, Friday also represented a Key Reversal day. And any technician worth their six screens knows this could lead to more green numbers on the horizon.

    On the other side of the aisle, those in the fundamentalist camp can be heard vehemently arguing that Friday's action was simply a bounce of the dead cat variety. The big-picture gang is quick to remind us that nothing changed on Friday. Europe is still stuck in their debt mess, China is still trying to slow their economy, the jobs picture in the U.S. is iffy, housing remains a big problem, and financial regulatory reform is still likely to knock a bunch of cash from the bottom lines of any company even remotely related to the financial industry.

    So which is it? Frankly, both camps are probably right; it's just a matter of the time frame you choose to work in, or, put another way, which team you play for. Traders recognized on Friday that something good could indeed happen over the weekend (think coordinated central bank intervention to help support the Euro). As such, covering shorts and banking some good gains certainly explains the late burst of buying into the close. And yet, anyone with a fundamental outlook may not be able to see a very bright picture from a macro economic perspective.

    And this, folks, is what makes a market. The techies will likely come into this morning looking for more upside and/or maybe a quick retest of the lows before movin' on up. Yet, the macro crowd may see any further upside action as an opportunity to lighten up and "de-risk" their portfolios.

    So, like the title says, it's time to take sides and play the game accordingly.

    Turning to this morning... Futures are pointing to a lower open as investors are concerned about the need for a bank bailout in Spain as the government had to step in to close a bank after a merger failed.

    On the economic front, the Chicago Fed reported that their National Activity Index came in at +0.29 in April, which was above the revised March reading of +0.13 (revised from -0.07). The reading was the highest since December 2006.

    Finally, don't forget to check the happiness box today...

    Pre-Game Indicators

    Here are the important indicators we review each morning before the opening bell...

    • Foreign Markets: Europe is lower, while most of Asia (except Japan) is higher
       
    • Crude Oil Futures: -$0.22 to $69.82
       
    • Gold: +$7.80 to $1183.90
       
    • Dollar: Lower against Yen, higher vs. Euro and Pound
       
    • 10-Year Bond Yield: Currently trading at 3.18%

       

    • Stocks Futures Ahead of Open in U.S. (relative to fair value):
      • S&P 500: -10.6
         
      • Dow Jones Industrial Average: -82
         
      • NASDAQ Composite: -14.6

    Wall Street Research Summary

    Upgrades:

    • First Solar (NASDAQ:FSLR) - AURIGA
       
    • AmeriGas Partners (NYSE:AGU) - BofA/Merrill
       
    • Enbridge Energy Partners (NYSE:EEP) - BofA/Merrill
       
    • ONEOK Partners (NYSE:OKS) - BofA/Merrill
       
    • TC Pipelines (TCLP) - BofA/Merrill
       
    • Skyworks (NASDAQ:SWKS) - Barclays
       
    • Google (NASDAQ:GOOG) - Added to Top Picks Live at Citi
       
    • US BAncorp (NYSE:USB) - Citi
       
    • Abbott Labs (NYSE:ABT) - Citi
       
    • Alcon (NYSE:ACL) - Citi
       
    • Transocean (NYSE:RIG) - FBR Capital
       
    • Citi (NYSE:C) - Goldman Sachs
       
    • Ace Limited (NYSE:ACE) - Added to Conviction Buy at Goldman
       
    • CME Group (NASDAQ:CME) - Added to Conviction Buy at Goldman
       
    • Northern Trust (NASDAQ:NTRS) - Added to Conviction Buy at Goldman
       
    • Jefferies (JEF) - Added to Conviction Buy at Goldman
       
    • BlackRock (NYSE:BLK) - Goldman Sachs
       
    • Sprint Nextel (NYSE:S) - Goldman Sachs
       
    • Intuitive Surgical (NASDAQ:ISRG) - Lazard
       
    • Kennametal (NYSE:KMT) - Longbow Research
       
    • Exxon Mobil (NYSE:XOM) - RBC Capital
       
    • Health Care REIT (NYSE:HCN) - RW Baird
       
    • Nationwide Health (NYSE:NHP) - RW Baird
       
    • Intel (NASDAQ:INTC) - ThinkEquity
       
    • CF Industries (NYSE:CF) - UBS
       
    • Mosiac (NYSE:MOS) - UBS

       

      Downgrades:

    • Cree (NASDAQ:CREE) -CLSA
       
    • Arch Capital (NASDAQ:ACGL) - Goldman Sachs
       
    • Comerica (NYSE:CMA) - Goldman Sachs
       
    • Wells Fargo (NYSE:WFC) - Goldman Sachs
       
    • Franklin Resources (NYSE:BEN) - Goldman Sachs
       
    • Janus Capital (NYSE:JNS) - Goldman Sachs
       
    • Federated

       

      Long positions in stocks mentioned: INTC

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

       


      The opinions and forecasts expressed are those of David Moenning, founder of TopStockPortfolios.com 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 our websites and TopStockPortfolios publications 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.



    Disclosure: INTC
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