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Is This a Trend?

|Includes: Harley-Davidson, Inc. (HOG)

Daily State of the Markets 
Tuesday Morning – December 21, 2010

Good morning. If we did not find ourselves smack in the middle of the Holiday season, I'd probably be talking about how the bull camp's momentum appears to be waning and that we should be bracing for a meaningful pullback in response to the tiring trend, the overbought condition, and the overly optimistic sentiment readings. And while these issues are indeed present, it appears that the holiday spirit and the corresponding portfolio allocations may be the primary driver to what I will loosely term the current trend.

With little economic news to drive the action and the North Korean's displaying an uncharacteristic degree of restraint and maturity, stocks once again managed to grind higher on Monday. Sure, there were concerns. And yes, there were some negatives bandied about, not the least of which was the trash job in American Express (NYSE:AXP) over a downgrade and the Fed's new rules on debit transactions. But at the end of the day, all the indices save the venerable DJIA were flashing green.

Not even some news from across the pond could get the bears excited for more than a couple hours. It turns out that the ECB is growing concerned that its bailout of Ireland may have a few flaws given the collateral they allowed. And then Bloomberg reported that there is increasing speculation among investors regarding the ratings of countries like Belgium and, wait for it... France. Speaking of France, Minister Lagarde mentioned that the bailouts had violated the EU Treaty and were 'major transgressions.' Thus, all does not appear to be hunky dory in Euroland right now.

Back in August, this type of news flow would have likely produced a 200-point down day on the Dow as investors would have been fretting mightily about the future. But with investors now focused primarily on the improving economic outlook in the U.S., the attitude seems to be that Europe will take care of itself.

Although there weren't any major economic reports released on Monday, it is interesting to note that ECRI's Weekly Leading Index, which had garnered a fair amount of attention back in late-June when it turned down, flashed an expansion signal this week. Thus, the bears seem to be losing arguments left and right these days.

So, is this it? Is this the trend we have to look forward to for the next seven trading days? If so, then all news is good news, or put another way, no news is bad news. Every dip should be bought and bought quickly as fund managers are likely to continue to scramble to get that cash off their books (after all, with the S&P up double digits on the year, holding cash may not look so bright right about now). And the next stop on the S&P 500 would appear to be, well, higher.

If that last paragraph brings the word complacency to mind, we're in the same camp. But since the holiday season is upon us, we should remember to play the trend that's there and not the one are looking for.

Turning to this morning... Despite Moody's placing Portugal on watch for a downgrade, the reduction in the tensions on the Korean penninsula as well as supportive comments toward the EU and the Euro from the Chinese Vice-Premier appear to be the main catalysts for this morning's positive tone.

On the economic front... There is nothing on the economic calendar today here in the U.S.

Thought for the day: Try embracing an "attitude of gratitude" today...

Pre-Game Indicators

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


  • Major Foreign Markets:
    • Australia: +0.69%
    • Shanghai: +1.79%
    • Hong Kong: +1.57%
    • Japan: +1.51%
    • France: +1.00%
    • Germany: +0.75%
    • London: +0.91%


  • Crude Oil Futures: + $0.45 to $89.82
  • Gold: + $5.30 to $1391.40
  • Dollar: higher against the Yen and Pound, lower vs. Euro
  • 10-Year Bond Yield: Currently trading lower at 3.309%


  • Stocks Futures Ahead of Open in U.S. (relative to fair value):
    • S&P 500: +4.70
    • Dow Jones Industrial Average: +31
    • NASDAQ Composite: +6.7


Wall Street Research Summary


  • TW Telecom (NASDAQ:TWTC) - Citi
  • Cardinal Health (NYSE:CAH) - Target and estimates increased at Credit Suisse
  • McKesson (NYSE:MCK) - Target increased at Credit Suisse
  • ArcelorMittal (NYSE:MT) - Target increased at Credit Suisse
  • Boeing (NYSE:BA) - Added to short-term buy list at Deutsche BAnk
  • Adobe Systems (NASDAQ:ADBE) - Target increased at Goldman
  • Thoratec (NASDAQ:THOR) - UBS
  • Check Point Software (NASDAQ:CHKP) - Estimates increased at Wells Fargo
  • Harley-Davidson (NYSE:HOG) - Valuation range increased at Wells Fargo to $39-$41 (from $36-$39)



  • Urban Outfitters (NASDAQ:URBN) - Brean, Murray, Carret
  • El Paso Electric (NYSE:EE) - Jefferies


Long positions in stocks mentioned: HOG

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