Daily State of Markets: Unfinished Business

Includes: BB, DIA, ORCL, QQQ, SPY
by: David Moenning

Good morning. Although the indices gained a little ground on Friday and stock investors are likely enjoying the stellar September as the Dow is already up +5.9%, the S&P has gained +7.3%, and the NASDAQ has soared +9.5%, the bulls still have some unfinished business to attend to if the party is to continue.

Cutting to the chase, while the joyride to the upside that began on September 1st has been fun and has definitely put a damper on the bears' call for a September swoon, everyone and anyone who has ever clicked the buy button is aware of the fact that there is significant resistance overhead. Thus, the bottom line is that if our heroes in horns aren't able to break on through to the other side at some point soon, the bulls' efforts will probably wind up being for naught.

The problem is that since the current trading range has been in effect for four long months now, the battle lines are well established. As such, neither team seems to be willing to give up their goal line without a fight. We saw the bulls dig in at the end of August at the low end of the range and it would appear that the bears are now attempting to defend their turf.

Some will argue that the good news/bad news situation that seems to accompany each day's batch of economic and corporate data is likely to keep the market range bound for some time yet. Friday's daily dose of data certainly seems to support this view. On the one hand, traders could take heart from the quarterly results out of tech bellwethers Research In Motion (RIMM) and Oracle (NYSE:ORCL). And in fact, the good news in four-letterland pushed the NASDAQ out to the highest close since the May debacle began.

But, on the other hand, the University of Michigan's Consumer Sentiment index was more than a little disappointing. While analysts had been looking for a reading around the 70 level, the actual report came in a 66.6. The first point here is that the number was well below expectations. However, it is also worth noting that the index reading of 66.6 was only a smidge (one tenth) higher than the recent lows put up on the board in July. Thus, it is easy to argue that while the consumer has held up pretty well in recent months, the deluge of bad news may have finally forced John Q. Public back into the man cave.

Of course, there is always the chance that Friday's action was simply a result of the quarterly expiration of options on just about everything you can imagine as quad-witch expiration events have been known to mess with the market on occasion. However, from our perch, it appears that the NASDAQ may be trying to lead the way out of the range and it is now up to the Dow and S&P to follow suit. So, as I've been saying recently, stick around; this should be interesting.

Turning to this morning... traders appear to be in a decent mood for a Monday as there seems to be some expectations building for the Fed to either announce or at least hint at QE II - aka another round of bond buying designed to help the economy.

On the economic front... We don't have any economic data to review before the bell but we will get the report on the NAHB Housing Market Index at 10:00 am eastern.

Finally, consider embracing an "attitude of gratitude" during the day today...

Pre-Game Indicators

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

  • Major Foreign Markets:
    • Australia: -0.17%
    • Shanghai: -0.38%
    • Hong Kong: +0.03%
    • Japan: NA
    • France: +0.98%
    • Germany: +0.57%
    • London: +1.17%
  • Crude Oil Futures: + $0.13 to $73.79
  • Gold: + $5.00 to $1282.50
  • Dollar: Higher against the yen and pound, lower versus euro
  • 10-Year Bond Yield: Currently trading higher at 2.734%
  • Stocks Futures Ahead of Open in US (relative to fair value):
    • S&P 500: +7.56
    • Dow Jones Industrial Average: +40
    • NASDAQ Composite: +6.38

Disclosure: No positions