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Has Anything Changed?

Apr. 18, 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 
Monday Morning - April 18, 2011

Good Monday morning and welcome back. Unlike the majority of last week, Friday's trading session had a plethora of data inputs to weigh before decisions could be made. There were earnings from some big names, GDP numbers out of China, inflation at the consumer level in the U.S., not one, but two reports on U.S. manufacturing, and a report on the state of the consumer from the University of Michigan. Toss in the usual concerns about a country or two across the pond, rising oil prices, and an options expiration event, and one might have expected some fireworks.

Although there was a bit of volatility during the day as the boys did play with their computer toys a little in the early going, the fact that an abundance of questions remain unanswered left traders to wonder if anything had really changed.

While nobody but the fast-money crowd enjoys a range-bound market, the fact that there is still a fair amount of uncertainty on any number of topics appears to be keeping the indices from straying too far in either direction at the present time. For example, while the bears tried to make the most of a couple of high profile misses from the likes of Bank of America (BAC) and Google (GOOG), the positive data from the Empire Manufacturing index, which reveals the state of the manufacturing sector in the New York region, and the University of Michigan's Consumer Sentiment data both managed to improve the mood during the session.

However, with concerns still running high regarding the impact of oil- and commodity-induced inflation on both the consumer and corporate America, the bulls were unable to move the needle very far on Friday. In short, the thinking/worry on the Street is that the momentum of earnings and the economic recovery may be peaking. So, given that the bull market is now more than two years old, a peak in growth on either the economic or corporate front could very well become a problem.

How can we tell if this is happening, you ask? First off, you can let the market "tell you" by watching the price action and the charts. The bottom line here is if the S&P 500 were to break below 1260, there could be some serious downside seen. But first, the bears would have to push the index through the 1300 level. And if this occurs, we will go to high alert status from a risk management perspective.

Next, investors will want to listen to the "message" from the earnings season. This time, the top- and bottom-line numbers may actually be much less important than the company commentary and the guidance going forward. You will want to pay particular attention to any mention of increased costs, lower profit margins, or talk of cost pass-through's to the consumer. Rest assured taht any of the above will likely cause traders to hit the sell button with regularity.

Investors will also want to pay attention to any and all economic data from the month of April. The worry is that the combination of the spike in oil prices, the unrest in the MENA region, and the triple tragedies in Japan will cause the U.S. economy to hit a speed bump (aka a "soft patch"). Should the evidence begin to point to this occurring, again, things could get dicey.

So, while we are NOT suggesting that any of this bad stuff will occur, we thought you might want to know what to watch out for.

Turning to this morning... The mood has turned sour in the pre-market in reponse to more talk of Greece needing to restructure its debt (which would mean a technical default), rising rates at Spain's T-Bill auction, another hike in the Reserve Requirement for Chinese Banks (the fourth this year and seventh since October), and a downgrade of Irish banks (not a real surprise).

On the Economic front... There is no data to reveiw before the bell but we will get a report on NAHB Housing Market Index at 10:00 am eastern.

Thought for the day: Will you make time for you 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: +0.21%
    • Hong Kong: -0.74%
    • Japan: +0.36%
    • France: -1.53%
    • Germany: -1.12%
    • London: -1.01%

  • Crude Oil Futures: -$1.57 (May contract) to $108.09
  • Gold: -$3.50 to $1482.50
  • Dollar: higher against the Yen Euro and Pound
  • 10-Year Bond Yield: Currently trading at 3.384%
  • Stocks Futures Ahead of Open in U.S. (relative to fair value):
    • S&P 500: -5.13
    • Dow Jones Industrial Average: -45
    • NASDAQ Composite: -6.50


Wall Street Research Summary


  • Norfolk Southern (NSC) - BB&T Capital Markets
  • FMC Technologies (FTI) - Mentioned positively at Citi
  • Weatherford (WFT) - Mentioned positively at Citi
  • Dresser-Rand (DRC) - Mentioned positively at Citi
  • PG&E (PCG) - Credit Suisse
  • KB Home (KBH) - Credit Suisse
  • Eastman Chemical (EMN) - Added to Short-Term Buy at Deutshce Bank
  • Qualcomm (WCOM) - Target increased at FBR Capital
  • Hyatt Hotels (H) - FBR Capital
  • CA Technologies (CA) - Goldman Sachs
  • ArcelorMittal (MT) - Goldman Sachs
  • Dow Chemical (DOE) - Estimates increased at UBS
  • Huntsman (HUN) - Estimates increased at UBS



  • Gap (GPS) - BAC/ML, Goldman Sachs
  • Regis (RGS) - BAC/ML
  • Genco Shipping (GNK) - Citi
  • BMC software (BMC) - Citi
  • Iron Mountain (IRM) - Citi
  • Evergreen Solar (ESLR) - Citi
  • Infosys (INFY) - Credit Suisse
  • CommVault Systems (CVLT) - Goldman Sachs
  • Best Buy (BBY) - KeyBanc
  • Kraft Foods (KFT) - Morgan Stanley
  • Community Health (CYH) - Oppenheimer
  • Celanese (CE) - UBS


    Earnings Before The Bell



    Citi C $0.10 $0.09
    WW Grainger GWW $2.18 $1.79
    Halliburton HAL $0.61* $0.58
    KeyCorp KEY $.21 $0.15
    Eli Lilly LLY $1.24 $1.16
    M&T Bank MTB $1.67 $1.42

    * Report includes items that make comparisons to the consensus estimate questionable

    Long positions in stocks mentioned: FTI

    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.

    Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.

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