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Back On Track?

Daily State of the Markets 
Monday Morning – November 22, 2010

Good morning. After two weeks of corrective action, the key question stock traders face at the moment is: Are the bulls are back on track after last week's strong finish? The bears will argue that Thursday and Friday's move higher was merely an oversold bounce coupled with some options expiration shenanigans. But as one might expect, the bulls have a slightly different view of the action.

For starters, our heroes in horns are quick to point out that their opponents had plenty of chances last week but couldn't seem to get the fear party started in any meaningful way. Sure, Tuesday wasn't pleasant. But after that, the big worries that our friends in the bear camp were so confident of - namely the current sovereign debt situation in Ireland, the future sovereign debt problem in Portugal, and China's tightening moves - seemed to dissipate.

Along that line of thinking, the bull camp further suggests that since traders appeared to brush aside Friday's news that China had increased bank reserve requirements for the fifth time this year and for the second time in two weeks, this is a reason to be optimistic. The bottom line view from the glass-is-half-full crowd seems to be that a drop of 4% over an eight-day stretch may have been sufficient to discount the rehash of sovereign debt worries that have cropped up again with the Ireland situation.

Two other positives the bull camp are quick to point to include the calendar and the various historical market cycles. While making predictions on the outcome of the stock market is a fool's errand, everybody in the game knows that we have entered "the most wonderful time of the year." In short, stocks tend to enjoy a rather spirited jaunt into the end of the year. And one look at the calendar suggests that it just might be time for the bulls to start movin' on up.

Then there are the various cycle composites. Regardless of whether you favor the one-year cycle, the four-year Presidential cycle, the mid-term election cycle, or even a combination of the one-, four-, and ten-year market cycles; the point is that history shows the bulls should be given the benefit of the doubt from here into next spring.

Even the tendencies around Thanksgiving would seem to favor our heroes in horns. While the action tends to be a little on the dull side during the three days prior to the Thanksgiving Holiday, the market has sported gains for the three-day period in seven of the last ten years. What about the years stocks fade into Thanksgiving, you ask? It seems that Black Friday tends to give buyers a reason to get back in the game.

So, with the indices perched at an important technical juncture at the moment (the Dow and S&P are both bumping into overhead resistance and various moving averages), it will be interesting to see if the bears try to mount a counteroffensive to the bulls' latest charge. But unless our furry friends can get something going - and soon - we'll suggest that anyone still on the fence might want to lean the bulls way from a big-picture standpoint.

Turning to this morning... Early optimism surrounding the announcement that Ireland will indeed accept assistance from the EU/IMF in order to help prop up the banks the government supported during the Credit Crisis seems to be fading. European markets have turned lower in the past hour and have dragged U.S. stock futures down with them.

On the economic front... We don't have any economic data on the calendar today to guide traders today.

Finally, remember that happiness is a choice. What will you choose today?

Pre-Game Indicators

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

  • Major Foreign Markets:
    • Australia: +0.30%
       
    • Shanghai: -0.15%
       
    • Hong Kong: -0.35%
       
    • Japan: +0.93%
       
    • France: -0.72%
       
    • Germany: -0.11%
       
    • London: -0.76%

     

  • Crude Oil Futures: - $0.10 to $81.88
     
  • Gold: + $1.50 to $1353.80
     
  • Dollar: higher against the Yen, Euro and Pound
     
  • 10-Year Bond Yield: Currently trading lower at 2.829%

     

  • Stocks Futures Ahead of Open in U.S. (relative to fair value):
    • S&P 500: -3.57
       
    • Dow Jones Industrial Average: -39
       
    • NASDAQ Composite: -6.57

       

Wall Street Research Summary

Upgrades:

  • Amkor (AMLR) - Citi
     
  • Teradyne (NYSE:TER) - Citi
     
  • FedEx (NYSE:FDX) - Added to S.T. Buy list at Deutsche Bank
     
  • Argo International (AGII) - FBR Capital
     
  • Cirrus Logic (NASDAQ:CRUS) - Jefferies
     
  • Tesoro (TSO) - Morgan Stanley
     
  • SanDisk (SNDK) - RW Baird
     
  • Kimco Realty (NYSE:KIM) - UBS
     
  • Kilroy Realty (NYSE:KRC) - UBS
     
  • HCP (NYSE:HCP) - UBS
     
  • Public Storage (NYSE:PSA) - UBS

     

    Downgrades:

  • Express Scripts (NASDAQ:ESRX) - Removed from S.T. Buy list at Deutsche Bank
     
  • Massee Energy (NYSE:MEE) - FBR Capital
     
  • Deere & Company (NYSE:DE) - Morgan Stanley
     
  • ArcelorMittal (NYSE:MT) - UBS
     
  • Atwood Oceanics (NYSE:ATW) - Wells Fargo

     

    Long positions in stocks mentioned: None

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

     


    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.

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Disclosure: none