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A Fistful of Reasons (Still Don't Matter)

Apr. 06, 2011 8:41 AM ET
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David Moenning's Blog
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Portfolio Strategy, ETF investing, Long/Short Equity

Seeking Alpha Analyst Since 2009

David Moenning is founder and Chief Investment Officer at Heritage Capital Research, a Registered Investment Advisor. Heritage is an independent, privately owned, investment management firm located in the Denver area. Mr. Moenning has more than 33 years of portfolio management experience and focuses on a risk-managed approach to capital markets via modernized portfolio development and dynamic adaptation to ever-changing macro environments. Most recently Chief Investment Officer for a $1.3 billion RIA firm.

Daily State of the Markets 
Wednesday Morning - April 6, 2011

How tough is it to be a bear these days, you ask? Well, by my count, there were no fewer than eight negative headlines for the bears to try and take advantage of on Wednesday. And yes, a couple might be considered retreads. But despite a market that is once again overbought and bumping its head on resistance as well as a fistful of reasons to do some selling, our furry friends were able to produce a decline of just 6 points on the venerable DJIA. Oh, and don't look now, but the smallcaps, midcaps, and even the NASDAQ wound up with green screens by the time the closing bell rang. Ouch.

Sure, there were a couple of positive headlines that kept the dip-buyers doing their thing. And it was indeed nice to see the semiconductors heading north for a change. But let's face it; if the bears can't get anything done with the batch of negativity provided to them yesterday, there might be a problem big enough to require a 12-step program.

Let's see here... First there was the downgrade of Portugal and reports of a buyers strike by Portuguese banks. And while we have seen the movie about the PIGI'S before, the spreads on CDS etc remind us that all is not well in the Eurozone. Next up was the fourth rate hike by the Chinese in the last six months. Again, this story may be getting old, but it did have some punch in the pre-market. And then there was the usual chatter about the ECB's likely rate hike on Thursday and the latest horror story out of Japan (did you know that Tuna migrate from the now radioactive waters off the coast of Japan to the west coast of the U.S. each year?). Oh and lest we forget, oil prices were once again over $108 in the wee hours.

After we got done with the old news, it wasn't long before what might be considered the new bad news started to flow. First we got word that the Nasdaq 100 index is going to be rebalanced (effective May 2) and that anybody looking to mirror the index is going to have to sell a big slug of Apple (the weighting in the NDX is dropping from 20% to 12.3%). Next, it was the ISM Non-Manufacturing Index, which presented the first hint of a possible hiccup in the economic recovery theme. And finally, we got an acknowledgement from the Fed that they are indeed starting to raise an eyebrow with regard to the prospects of inflation - or the expectations thereof, anyway.

However, despite this plethora of what could be considered negative news, the bulls once again refused to yield as the major indices continued to hang around their recent highs. And while you may be tired of hearing it, the bull camp continues to enjoy telling us that the midcaps once again finished at new all-time record highs and that the Russell 2000 is within spitting distance of its all-time high set in May 2007.

The bears defend themselves by reminding us that patience is the key here as the S&P, Dow, and NASDAQ have not been able to break on through to the other side of the overhead resistance seen on the charts. The glass-is-half-empty crowd points to Dow 12,400 as a line in the sand that their opponents have simply been unable to cross. And to hear the bear camp tell it, the fact that the bulls haven't been able to "get 'er done" after several tries is, in and of itself, a problem.

But, unless and until the fistfuls of reasons for a decline start to matter to traders, it may remain difficult to don the bear hat each day.

Turning to this morning... Gains in overseas markets (including Shanghai, which was able to shake off the rate hike) as well as word that the Japanese have been able to stop the flow of radioactive water that had been pouring into the ocean for the past five days have lifted spirits in the early going.

On the Economic front... Once again, there is no economic data to review before the bell this morning and nothing of importance on the calendar for the remainder of the day.

Thought for the day: Never forget that the first rule of life, medicine, and money management is to do no harm...

Pre-Game Indicators

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


  • Major Foreign Markets:
    • Australia: +0.26%
    • Shanghai: +1.14%
    • Hong Kong: +0.56%
    • Japan: -0.32%
    • France: +0.14%
    • Germany: +0.68%
    • London: +0.59%

  • Crude Oil Futures: +$0.30 (May contract) to $108.47
  • Gold: +$8.10 to $1460.60
  • Dollar: lower against the Yen, Euro and Pound
  • 10-Year Bond Yield: Currently trading at 3.500%
  • Stocks Futures Ahead of Open in U.S. (relative to fair value):
    • S&P 500: +6.70
    • Dow Jones Industrial Average: +61
    • NASDAQ Composite: +16.73


Wall Street Research Summary


  • Denbury Resources (DNR) - Barclays
  • Sprint Nextel (S) - Mentioned postively at Credit Suisse
  • Aeropstale (ARO) - KeyBanc
  • La-Z-Boy (LZB) - KeyBanc
  • Ethan Allen (ETH) - KeyBanc
  • Charter Communications (CHTR) - Morgan Stanley
  • Stryker (SYK) - Target increased at Oppenheimer
  • Abercrombie & Fitch (ANF) - Target increased at Oppenheimer
  • Optimer Pharmaceuticals (OPTR) - Target increased at Oppenheimer
  • Broadcom (BRCM) - Oppenheimer
  • Urban Outfitters (URBN) - Piper Jaffray
  • Zumiez (ZUMZ) - Piper Jaffray
  • Watsco (WSO) - UBS



  • Quicksilver Resources (KWK) - Barclays
  • CIT Group (CIT) - Barclays
  • Health Net (HNT) - BMO Capital
  • NVIDIA (NVDA) - Estimates cut at Cowen
  • Louisiana-Pacific (LPX) - Credit Suisse
  • Waddell & Reed (WDR) - Keefe, Bruyette & Woods
  • Cablevision (CVC) - Morgan Stanley


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.

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. (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.

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