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Is Something Missing?

Daily State of the Markets 
Monday Morning – June 14, 2010

Good morning. There appeared to be something missing on Friday. Something that allowed traders to focus on the bright side for a change, even if just for a few minutes. Something that has been with us nearly every day for nearly two months. Something that has put the kibosh on each and every rally attempt so far. What is this something missing, you ask? The daily dose bad news out of Europe, of course.

Without any sovereign debt downgrades, announcements of revenue shortfalls, expanding credit spreads, or rumors of default, investors in the U.S. were left to trade on such mundane issues as economic data and corporate results. And while the results from the U.S. economy were mixed on Friday, the very fact that there wasn't anything in the headlines from across the pond may have been enough to produce the late-day surprise to the upside.

Yes, the day was largely sideways up until the last thirty minutes. Yes, it was likely the high-frequency trading programs that were responsible for the smiles at the end of the day. And yes, there may have been some position squaring in front of the weekend and next week's options expiration event. However, one does have to admit that a second straight day of green screens felt pretty darn good to anyone holding long positions.

If you are looking for the catalyst to the 80-point surge seen into the close on Friday, you may be disappointed. There wasn't any news or any rumor that we were aware of. But with the indices moving through a couple of technical points and a weekend approaching that might not contain any "tape bombs," those leaning on the short side may have been tempted to run for cover.

Actually, a mixed close would have made a lot of sense on Friday as the data points presented were a mix of good and bad news. On the plus side of the ledger, the bulls took solace in the upbeat guidance out of National Semiconductor (NYSE:NSM), the positive reports in Pharma and Biotech, as well as the University of Michigan Confidence Index, which was surprisingly better than expected.

However, in the watch-what-they-do-not-what-they-say category, the Retail Sales numbers for May were a big disappointment. However, given the constant dour news out of Europe, oil spewing into the Gulf, and a fairly significant dive in the stock market (which will surely start showing up in 401(k) and brokerage statements soon), it is little wonder that John Q. Public and his family might have spent a little less time at the malls last month.

So, is there anything to be taken away from Friday's action? While one day without bad news does not a trend make, we will say that the chart action does appear to be encouraging. And if the bad news can stay away long enough for our heroes in horns to push through the overhead resistance, we might just have something to talk about. We'll keep our fingers crossed.

Turning to this morning... We dont't have any economic data to review before the bell today. Stock futures are pointing to a strong open on the back of rallies in overseas markets and word that Spain does not need EU assistance at this time.

Finally, here's a thought for today: Raise your expectations. As Michelangelo said, the danger is not that your hopes are too high, but rather...

Pre-Game Indicators

Here are the important indicators we review each morning before the opening bell...

  • Major Foreign Markets:
    • Australia: +1.53%
       
    • Shanghai: +0.29%
       
    • Hong Kong: +0.90%
       
    • Japan: +1.80%
       
    • France: +1.64%
       
    • Germany: +1.12%
       
    • London: +0.52%

     

  • Crude Oil Futures: + $1.82 to $75.60
     
  • Gold: - $2.10 to $1228.10
     
  • Dollar: Lower against Yen, Euro, and Pound
     
  • 10-Year Bond Yield: Currently trading higher at 3.31%

     

  • Stocks Futures Ahead of Open in U.S. (relative to fair value):
    • S&P 500: +8.10
       
    • Dow Jones Industrial Average: +81
       
    • NASDAQ Composite: +15.13

       

Wall Street Research Summary

Upgrades:

  • JetBlue Airways (NASDAQ:JBLU) - BofA/Merrill
     
  • JB Hunt Transport (NASDAQ:JBHT) - BofA/Merrill
     
  • Informatica (NASDAQ:INFA) - BofA/Merrill
     
  • Harmonic (NASDAQ:HLIT) - BofA/Merrill
     
  • Pulte Group (NYSE:PHM) - Citi
     
  • T. Rowe Price (NASDAQ:TROW) - FBR Capital
     
  • Federated Investors (NYSE:FII) - FBR Capital
     
  • Con Edison (NYSE:ED) - Goldman Sachs
     
  • Great Plains Energy (NYSE:GXP) - Goldman Sachs
     
  • Amylin Pharmaceuticals (AMLN) - Piper Jaffray
     
  • MGM Mirage (NYSE:MGM) - Soleil Securities
     
  • Mohawk (NYSE:MHK) - Stifel Nicolaus

     

    Downgrades:

  • Lions Gate (LGF) - BMO Capital
     
  • Akamai (NASDAQ:AKAM) - Citi
     
  • El Paso Electric (NYSE:EE) - Goldman Sachs
     
  • CDC Corp (NASDAQ:CHINA) - Janney Capital
     
  • Nokia (NYSE:NOK) - Estimates reduced at Oppenheimer

     

    Long positions in stocks mentioned: none

    For more "top stock" portfolios and research, visit TopStockPortfolios.com

     


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