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Duking It Out

Apr. 07, 2011 8:49 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 
Thursday Morning - April 7, 2011

These are the times when it is oh so easy to become complacent with the action in the stock market. And in short, this just might be one of those times. For the fourth straight day, the major indices wound up doing an awful lot of nothing, leading investors to believe that there isn't much downside risk at the present time. In case you haven't noticed, the sentiment amongst the talking heads has gone from dire to overtly happy over that past couple of weeks. Cutting to the chase, the thinking seems to be that traders are simply waiting on the results from the earnings parade right now and that once the numbers start rolling in, it will be up, up, and away.

But behind the scenes, the story is a little different. For the fourth straight day, the two teams wound up duking it out over what is turning out to be a very important line in the sand at 1340 on the S&P 500. And for the fourth straight day the bears wound up with what amounts to a moral victory.

While I am not predicting that our furry friends will emerge victorious from the current scuffle, it is worth noting that the bears were once again able to keep their opponents from pushing the ball across the goal line yesterday. And although a positive headline somewhere in here might just do the trick and make the current battle over the breakout a moot point, so far at least, we have to be impressed with the bears' efforts.

Exhibit A in our argument that this is no time to set-it-and-forget-it is the old Wall Street saw, "It isn't the news, but how the market reacts to the news that matters." In this case, there really wasn't any news to drive futures prices higher in the pre-market yesterday morning. And yet, it looked as if the bulls had everything going their way by the time the opening bell rang. Thus, with no real headlines pushing the issue, the thinking was that the path of least resistance continued to be higher.

However, a funny thing happened on the way to the celebration as a bare knuckled fistfight broke out right about the time it looked like the bears were doomed to yet another defeat. With the Dow sitting comfortably above 12,400 and the S&P pushing through the 1340 level, the bears suddenly and without warning appeared to find their mojo. With a one-two punch, the glass-is-half-empty gang hit the semis and the until recently untouchable energy names. To the surprise of most, the sell programs gained some traction and before you figure out when Alcoa was going to report earnings, the breakout had morphed into a fourth consecutive fakeout.

To be sure, the bulls can fix this situation with one good day. A single economic report, a takeover, or even a rumor could easily convince those leaning toward the dark side to give up the game. But until then, it looks like the two teams will continue to duke it out and that a pullback to test the 1320 zone isn't completely out of the realm of possibility.

Turning to this morning... Although the same-store sales numbers from the nation's retailers have been coming in a bit better than expectations and the ECB did, in fact, raise interest rates a quarter point, things are fairly quiet in the early going.

On the Economic front... Initial Claims for Unemployment Insurance for the week ending 4/2 fell by 10K to 382K. This was a smidge below the consensus estimate for 388K and below last week’s upwardly revised total of 392K. Continuing Claims for the week ending 3/26 came in at 3.723M vs. 3.700M and last week’s 3.732M.

Thought for the day: Don't forget to check the happiness box today...

Pre-Game Indicators

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


  • Major Foreign Markets:
    • Australia: -0.12%
    • Shanghai: +0.22%
    • Hong Kong: -0.01%
    • Japan: +0.07%
    • France: +0.37%
    • Germany: +0.15%
    • London: +0.01%

  • Crude Oil Futures: -$0.03 (May contract) to $108.80
  • Gold: +$2.20 to $1460.70
  • Dollar: higher against the Yen, Euro and Pound
  • 10-Year Bond Yield: Currently trading at 3.564%
  • Stocks Futures Ahead of Open in U.S. (relative to fair value):
    • S&P 500: +0.49
    • Dow Jones Industrial Average: +10
    • NASDAQ Composite: +0.46


Wall Street Research Summary


  • Lam Research (LRCX) - Added to Top Picks at Citi
  • Salesforce.com (CRM) - FBR Capital
  • IntercontinentalExchange (ICE) - Keefe, Bruyette & Woods
  • Elan Corp (ELN) - RBC Capital
  • Minefinders (MFN) - TD Newcrest
  • Trinity Industries (TRN) - Estimates increased at Wells Fargo



  • Allscripts Healthcare (MDRX) - Auriga
  • Seaspan (SSW) - BAC/ML
  • Travelzoo (TZOO) - Benchmark Co
  • Regeneron Pharmaceuticals (REGN) - Roth Capital
  • CLECO (CNL) - 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.

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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