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The Games People Play

Daily State of the Markets 
Friday Morning - November 18, 2011

Good morning. Although I will likely be accused of making the understatement of the month here, the primary driver of the stock market at the present time is the same as it has been for the past four months - fear of what the credit contagion in Europe will do to both the world's economies and banking systems. As such, it is little surprise that stocks took a turn for the worse on Thursday in response to rates moving up to Euro-era highs in France. Yes, France.

The problem is that with France now joining the PIGIS on the list of countries that the bond vigilantes are targeting, Germany is just about the only major Eurozone country not in trouble at the moment. Therefore, bond traders are demanding higher and higher risk premiums when they lend money to any of these countries these days. So, until investor confidence can be restored to the bond markets in Europe, this mess is likely to go on (and on, and on).

As if the never ending drama in Europe wasn't tough enough to deal with, traders have probably noticed by now that Thanksgiving is just a few days away. And in addition to all the family traditions surrounding our national day of giving thanks, this year's holiday brings a little something extra: The Supercommittee deadline.

Although all eyes have been on Greece, Italy, Spain, et al lately, the not-so minor task of the Supercommittee is to cut a few trillion here and there from the budget of the United States government over the next ten years. And if you will recall, should the so-called Supercommittee fail to meet their Thanksgiving deadline, automatic, across-the-board spending cuts will go into effect.

While the stakes would appear to be high for any committee (super, or otherwise) in Washington to avoid a repeat of the out-and-out embarrassment that took place this summer, it is starting to look like the boys and girls on the Supercommittee would rather play politics than do anything to actually help their country get on the right fiscal path. Yep, that's right; the professional politicos are reportedly deadlocked in their negotiations. Shocking.

So, with Angel Merkel running around saying the first thing that comes to her mind with alarming regularity, the ECB looking to avoid acting like a central bank, and the Supercommittee acting like children, is it any wonder that traders decided to vote with their feet yesterday?

And while we're in the process of passing out blame for the current two-day rout in stock prices, let's not forget about the fast-money traders and their charts. Silly as it may sound, the explanation provided for yesterday's 200-point dance to the downside during lunch was that a "technical level" on the S&P 500 was breached. Never mind that the various news outlets couldn't agree on this oh-so important technical level, it was apparently critical enough to cause a sell program or three to be run.

I don't know about you, but I am growing weary of the games being played with the stock market by the big boys and their computers. In the old days (you know, way back before the Flash Crash), there would be a reason for stock prices to move 200 points in a matter of minutes. But in the age of HFT, where computers trade first and their programmers ask questions later, reasons appear to optional.

Thus, I'm of the mind that investors need two things in order to succeed these days. First, a healthy dose of patience is mandatory. And second, it helps if you have a trading system to guide you through the volatility. While there is no such thing as a perfect system, it is reassuring to have something to help you through the games people play these days.

Turning to this morning... Word that the IMF may be working with countries such as the U.S. and China to lend Europe a hand has helped the mood improve in Europe and on Wall Street in the early going.

On the Economic Front... There are no reports scheduled for release before the bell, but we will get the LEI at 10:00 am eastern.

Thought for the day... Best of luck on this Friday and be sure to enjoy the weekend!

Pre-Game Indicators

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


  • Major Foreign Markets:
    • Australia: -1.79%
    • Shanghai: -1.88%
    • Hong Kong: -1.73%
    • Japan: -1.24%
    • France: +0.29%
    • Germany: +0.44%
    • Italy: +1.30%
    • Spain: +0.92%
    • London: -0.60%

  • Crude Oil Futures: +$0.95 to $99.77
  • Gold: +$13.50 to $1733.70
  • Dollar: higher against the Yen, lower vs. Euro and Pound
  • 10-Year Bond Yield: Currently trading at 2.012%
  • Stock Futures Ahead of Open in U.S. (relative to fair value):
    • S&P 500: +8.72
    • Dow Jones Industrial Average: +71
    • NASDAQ Composite: +9.16


Wall Street Research Summary


  • Children's Place (NASDAQ:PLCE) - Caris & Company
  • Cintas (NASDAQ:CTAS) - Citi
  • Smithfield Foods (NYSE:SFD) - Credit Suisse
  • TJX Companies (NYSE:TJX) - Mentioned positively at Goldman
  • Aruba Networks (NASDAQ:ARUN) - Janney Capital
  • Xcel Energy (NYSE:XEL) - Macquarie Research
  • Blue Coat (NASDAQ:BCSI) - Sterne, Agee



  • Transdigm (NYSE:TDG) - Bank of America Merrill Lynch
  • Research In Motion (TIMM) - Target decreased at Canaccord Genuity
  • Mosaic (NYSE:MOS) - Target decreased at Canaccord Genuity
  • Lennar (NYSE:LEN) - Citi
  • Central European Distribution (NASDAQ:CEDC) - Credit Suisse
  • Intel (NASDAQ:INTC) - Estimates reduced at Goldman Sachs
  • Darden Restaurants (NYSE:DRI) - Morgan Stanley


Long positions in stocks mentioned: None

For more of Mr. Moenning's thoughts and research, visit


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